Babcock, Macquarie and James Hardie
February 2, 2010
Dear Mayne Reporters,
Trading halts and late night responses to ASX queries are never a good look and the teetering Babcock & Brown has been specialising in them over the past 24 hours.
After the stock plunged $1.06 to a record low of $3.45 yesterday, B&B produced this response to an ASX query at 7.26pm last night and asked for the stock to be suspended pending a board sub-committee meeting which is expected to force the departure of CEO Phil Green along with other changes at the top.
It is extremely rare indeed for board or management changes to be deemed so market sensitive that the stock can't trade. Surely Babcock will have to follow Allco's lead from earlier in the year and delay tomorrow's profit result.
You can't fire the CEO and embrace the concept of an independent chairman on the same day the profit is being released and what chance does the new bloke get to slash balance sheet values?
Babcock claims to have net assets of $2.5 billion yet the market cap is $1.15 billion after yesterday's route, suggesting $1 billion-plus in write-offs and a huge loss are coming.
The company's investments in its various funds mostly hit fresh record lows today so the potential write-offs that Ernst & Young auditor Mark O'Sullivan should push for keep blowing out.
Today's carnage was as follows:
Babcock & Brown Infrastructure: down 4.5c to 45.5c
Babcock & Brown Power: down 0.5c to 17.5c
Babcock & Brown Wind: down 10.5c to $1.29
Babcock & Brown Communities: down 2.5c to 30c.
Everest Babcock & Brown: down 1.5c to 50c.
Meanwhile, Macquarie Group has rubbed Babcock's nose in its today with a significant restructure of Macquarie Airports that sent the shares soaring almost 10%. We're looking at a $1 billion buy back and the sale of some airport assets, although the jewel in the crown, Sydney Airport, is not one of them despite chairman Max Moore-Wilton claiming he could sell it for more than $12 billion.
The Macquarie Capital privatisation proposal was also approved by 99% of shareholders this morning, although we did manage about 20 minutes of debate with no other shareholders contributing anything.
The most enjoyable moment was asking Anthony Nagle, a Bermuda resident with an English accent being beamed in by video from London, to explain his full history with Macquarie. Turns out that the Bermudan lawyers who advised Macquarie in the establishment of Macquarie Capital recommended Nagle chair one of the three stapled vehicles but there was no other history.
This theme about independent directors continued when Ken Moss, who fronted today's Macquarie Capital proceedings, was asked to explain his full Macquarie relationship. He admitted that the Millionaires Factory was house adviser to the two public companies he chairs, Boral and Centennial Coal. Not a good look.
The privatisation proposal at $3.40 a pop was a sensible outcome given that MCAG shares had got as low as $2 and the directors claim its various assets were worth more than $4 a share.
I tried to make the point that a ridiculously complex and poorly governed Bermuda registered vehicle was never going to fly but Ken Moss just said circumstances have changed. The bloke managed to give a 30 minute speech without once mentioned an operating asset, such was the crazy complexity and acronym soup on offer.
Interestingly, no Australian investors are part of the 7-strong consortium that has joined Macquarie in taking it private in this $840 million deal, so the Aussie capital strike on these vehicles appears to remain in place.
Only 3.85% of acceptances so far have requested to roll over into the new unlisted Bermudan vehicle, so this might yet fall short of the 5% minimum. I'll be going for the rollover option because it will be interesting to sit inside one of these unlisted Bermudan vehicles and observe the disclosure and returns.
Whilst Macquarie itself is rolling over into the unlisted fund, all the MCAG directors are taking the cash option and chairman Moss said this was to be consistent with the board recommendation.
He acknowledged that investors in MCAG's current structure have not been shown the full management contracts and he failed to answer the question about what information the seven privatisation partners of Macquarie have been given.
If they get the full management contracts, then surely us co-investors from the listed vehicle should get the same.
This all ties in with the forthcoming ASX board tilt on a platform that the ASX rescind the waivers given to the various Babcock and Macquarie vehicles which allow them to not reveal the full management contracts.
It was good to see Rob Ferguson, the highly regarded executive chairman of litigation funder IMF at the meeting, although he was only there as a shareholder despite all the "here's trouble" jokes from the various Macquarie types.
I had an interesting chat after the meeting with Ferguson and Macquarie co-founder Robin Crawford, who I erroneously told shareholders wasn't an independent MCAG director even though he left the bank way back in 1990. He seemed like a nice and very smart guy, who is an example of someone who has deliberately chosen not to sit on major public company boards because the risk-reward equation isn't good enough.
As time goes by, I'm increasingly coming to the view that we need to pay top non-executive directors more money to attract the best of breed, such as Robin Crawford.
That's all for now but we'll have some more after the James Hardie AGM which starts at 1pm.
If you're in Sydney, why not drop down to The Mint at 10 Macquarie Street to catch some of the action.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.
Trading halts and late night responses to ASX queries are never a good look and the teetering Babcock & Brown has been specialising in them over the past 24 hours.
After the stock plunged $1.06 to a record low of $3.45 yesterday, B&B produced this response to an ASX query at 7.26pm last night and asked for the stock to be suspended pending a board sub-committee meeting which is expected to force the departure of CEO Phil Green along with other changes at the top.
It is extremely rare indeed for board or management changes to be deemed so market sensitive that the stock can't trade. Surely Babcock will have to follow Allco's lead from earlier in the year and delay tomorrow's profit result.
You can't fire the CEO and embrace the concept of an independent chairman on the same day the profit is being released and what chance does the new bloke get to slash balance sheet values?
Babcock claims to have net assets of $2.5 billion yet the market cap is $1.15 billion after yesterday's route, suggesting $1 billion-plus in write-offs and a huge loss are coming.
The company's investments in its various funds mostly hit fresh record lows today so the potential write-offs that Ernst & Young auditor Mark O'Sullivan should push for keep blowing out.
Today's carnage was as follows:
Babcock & Brown Infrastructure: down 4.5c to 45.5c
Babcock & Brown Power: down 0.5c to 17.5c
Babcock & Brown Wind: down 10.5c to $1.29
Babcock & Brown Communities: down 2.5c to 30c.
Everest Babcock & Brown: down 1.5c to 50c.
Meanwhile, Macquarie Group has rubbed Babcock's nose in its today with a significant restructure of Macquarie Airports that sent the shares soaring almost 10%. We're looking at a $1 billion buy back and the sale of some airport assets, although the jewel in the crown, Sydney Airport, is not one of them despite chairman Max Moore-Wilton claiming he could sell it for more than $12 billion.
The Macquarie Capital privatisation proposal was also approved by 99% of shareholders this morning, although we did manage about 20 minutes of debate with no other shareholders contributing anything.
The most enjoyable moment was asking Anthony Nagle, a Bermuda resident with an English accent being beamed in by video from London, to explain his full history with Macquarie. Turns out that the Bermudan lawyers who advised Macquarie in the establishment of Macquarie Capital recommended Nagle chair one of the three stapled vehicles but there was no other history.
This theme about independent directors continued when Ken Moss, who fronted today's Macquarie Capital proceedings, was asked to explain his full Macquarie relationship. He admitted that the Millionaires Factory was house adviser to the two public companies he chairs, Boral and Centennial Coal. Not a good look.
The privatisation proposal at $3.40 a pop was a sensible outcome given that MCAG shares had got as low as $2 and the directors claim its various assets were worth more than $4 a share.
I tried to make the point that a ridiculously complex and poorly governed Bermuda registered vehicle was never going to fly but Ken Moss just said circumstances have changed. The bloke managed to give a 30 minute speech without once mentioned an operating asset, such was the crazy complexity and acronym soup on offer.
Interestingly, no Australian investors are part of the 7-strong consortium that has joined Macquarie in taking it private in this $840 million deal, so the Aussie capital strike on these vehicles appears to remain in place.
Only 3.85% of acceptances so far have requested to roll over into the new unlisted Bermudan vehicle, so this might yet fall short of the 5% minimum. I'll be going for the rollover option because it will be interesting to sit inside one of these unlisted Bermudan vehicles and observe the disclosure and returns.
Whilst Macquarie itself is rolling over into the unlisted fund, all the MCAG directors are taking the cash option and chairman Moss said this was to be consistent with the board recommendation.
He acknowledged that investors in MCAG's current structure have not been shown the full management contracts and he failed to answer the question about what information the seven privatisation partners of Macquarie have been given.
If they get the full management contracts, then surely us co-investors from the listed vehicle should get the same.
This all ties in with the forthcoming ASX board tilt on a platform that the ASX rescind the waivers given to the various Babcock and Macquarie vehicles which allow them to not reveal the full management contracts.
It was good to see Rob Ferguson, the highly regarded executive chairman of litigation funder IMF at the meeting, although he was only there as a shareholder despite all the "here's trouble" jokes from the various Macquarie types.
I had an interesting chat after the meeting with Ferguson and Macquarie co-founder Robin Crawford, who I erroneously told shareholders wasn't an independent MCAG director even though he left the bank way back in 1990. He seemed like a nice and very smart guy, who is an example of someone who has deliberately chosen not to sit on major public company boards because the risk-reward equation isn't good enough.
As time goes by, I'm increasingly coming to the view that we need to pay top non-executive directors more money to attract the best of breed, such as Robin Crawford.
That's all for now but we'll have some more after the James Hardie AGM which starts at 1pm.
If you're in Sydney, why not drop down to The Mint at 10 Macquarie Street to catch some of the action.
Do ya best, Stephen Mayne
* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.