ASX shock and Kerry Stokes a no show
February 2, 2010
Dear Mayne Reporters from a net cafe under McDonalds in Sydney's George St,
the big news this morning is that powerful proxy advisory firm Risk Metrics has apparently recommended a vote against incumbent ASX director Russell Aboud at the September 24 AGM.
I haven't seen their report but it is said to be circulating and, unfortunately, they've also recommended a vote against your truly.
Given the ability of these proxy firms to deliver big "against" votes, Aboud will almost certainly be the first ASX director to be re-elected with less than 90% of the vote in favour. Given the way Risk Metrics has humbled the likes of Rio Tinto and Telstra in the past, the protest could end up being quite large.
BrisConnections chairman Trevor Rowe, the ASX director who I reckon should have been targeted, apparently won the backing of Risk Metrics by some form of random selection.
Risk Metrics believes that the ASX board has endangered their monopoly franchise by mis-managing their supervisory role over the Australian market. There is now talk of breaking its monopoly and removing the regulatory role, something which could endanger future profits.
For this reason, Risk Metrics apparently decided to oppose one of the incumbents to "send a message" which incoming ASX chairman David Gonski will no doubt heed.
I haven't yet heard what the other reputable proxy advisory firm CGI Glass Lewis has done, but sincerely hope they bought my argument that it is important not to recommend both the incumbents, even if they do the customary "against" on the outsider.
Kerry Stokes a no show
The Seven Network EGM at Pyrmont this morning lasted for just 10 minutes and the authority to buyback up to 40 million shares was approved by 98% of the votes cast, which didn't include controlling shareholder Kerry Stokes who abstained.
Stokes and his son Ryan and best mate Peter Gammell took the bizarre decision not to turn up due to some form of conflict of interest.
I gave acting chairman and former McDonalds CEO Peter Ritchie a rocket about this, as there was a long list of questions that only the billionaire could have answered, especially after the WA News board accused the mogul of gaining control of Seven by stealth through the use of buybacks.
This will be the fourth Seven buyback in six years and the others have rolled out as follows:
2002: bought back 26 million shares at $5 a pop for $130 million.
2003: bought back 33.4 million shares at $5.80 a pop for $193 million.
2007-08: bought back 21.15 million shares at an average price of $9.64 for a total spend of $215 million.
Today: approved the purchase of 40 million shares which would reduce the outstanding capital from 206 million shares to 166 million.
With Seven shares wallowing at $8.19, the company is now about $32 million underwater on the just completed buyback, although the first two were clearly good investments. No Australian public company has done as many big buybacks as Seven. Indeed, once this one is complete it will have spent more than $800 million on buybacks when the whole company was floated for just $600 million or $2 a share back in 1993-94.
Given that Stokes owns about 93 million shares, if Seven buys the full amount this time without its executive chairman participating, he will become the only majority controlling shareholder in an ASX100 company.
However, Stokes is remaining a man of mystery on this front and director Bruce McWilliam read out a statement off his blackberry which suggested Stokes wouldn't be participating at these levels.
Stokes has never sold a share in Seven but it is not clear if he would want to crack 50%. For instance, would this mean all that debt loaded up in the Seven joint venture with KKR would have to be consolidated onto his private company balance sheet?
The board didn't enjoy a few other comments I made such as suggesting this buyback would limit the company's ability to launch a full takeover bid for WA News. However, I also spoke in favour of the buyback because the market is concerned about Seven's largely undisclosed punting on the stockmarket with that $2.6 billion of KKR cash that was sitting on the balance sheet 12 months ago.
Seven had an excellent record when it came to horse trading in media and stockmarkets investments up until the current downturn.
For instance, Seven booked a $205 million on its Optus frolic, made $76 million out of Colonial Stadium in Melbourne and pocketed small gain on plays such as B Digital, PMP and Ticketmaster.
However, if you look at the more recent record it is more than $100 million underwater on WA News, has dropped more than $50 million on Perth-based engineering company GRD and has also done badly on plays such as Engin and Unwired.
Then, of course, there is the 5% stake acquired in James Packer's media rump which still hasn't been properly explained.
The ASX really should tell Seven it is now a listed investment company which should release a monthly statement on its net tangible assets.
Instead, we've got this $1 billion punt on various undisclosed stocks and the market is not happy.
In this environment another buyback is preferable to more stockmarket punting in plays such as GRD, which is chaired by Stokes' old mate Richard Court, the former WA Liberal Premier who sat with him at this year's WA News EGM.
It would have been nice to talk all these issues through with Stokes today, but the guy clearly doesn't enjoy public debate and his independent directors should have insisted that he turn up.
ABC radio Sydney and Alex the cartoon
Have a listen to yesterday's regular 702 ABC Sydney chat with Deborah Cameron and, check out this story on Inside Business last night on the stage show about The AFR's Alex cartoon. There are still tickets available for tonight's performance in Melbourne through this special offer. See you there, hopefully.
That's all for now.
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.
the big news this morning is that powerful proxy advisory firm Risk Metrics has apparently recommended a vote against incumbent ASX director Russell Aboud at the September 24 AGM.
I haven't seen their report but it is said to be circulating and, unfortunately, they've also recommended a vote against your truly.
Given the ability of these proxy firms to deliver big "against" votes, Aboud will almost certainly be the first ASX director to be re-elected with less than 90% of the vote in favour. Given the way Risk Metrics has humbled the likes of Rio Tinto and Telstra in the past, the protest could end up being quite large.
BrisConnections chairman Trevor Rowe, the ASX director who I reckon should have been targeted, apparently won the backing of Risk Metrics by some form of random selection.
Risk Metrics believes that the ASX board has endangered their monopoly franchise by mis-managing their supervisory role over the Australian market. There is now talk of breaking its monopoly and removing the regulatory role, something which could endanger future profits.
For this reason, Risk Metrics apparently decided to oppose one of the incumbents to "send a message" which incoming ASX chairman David Gonski will no doubt heed.
I haven't yet heard what the other reputable proxy advisory firm CGI Glass Lewis has done, but sincerely hope they bought my argument that it is important not to recommend both the incumbents, even if they do the customary "against" on the outsider.
Kerry Stokes a no show
The Seven Network EGM at Pyrmont this morning lasted for just 10 minutes and the authority to buyback up to 40 million shares was approved by 98% of the votes cast, which didn't include controlling shareholder Kerry Stokes who abstained.
Stokes and his son Ryan and best mate Peter Gammell took the bizarre decision not to turn up due to some form of conflict of interest.
I gave acting chairman and former McDonalds CEO Peter Ritchie a rocket about this, as there was a long list of questions that only the billionaire could have answered, especially after the WA News board accused the mogul of gaining control of Seven by stealth through the use of buybacks.
This will be the fourth Seven buyback in six years and the others have rolled out as follows:
2002: bought back 26 million shares at $5 a pop for $130 million.
2003: bought back 33.4 million shares at $5.80 a pop for $193 million.
2007-08: bought back 21.15 million shares at an average price of $9.64 for a total spend of $215 million.
Today: approved the purchase of 40 million shares which would reduce the outstanding capital from 206 million shares to 166 million.
With Seven shares wallowing at $8.19, the company is now about $32 million underwater on the just completed buyback, although the first two were clearly good investments. No Australian public company has done as many big buybacks as Seven. Indeed, once this one is complete it will have spent more than $800 million on buybacks when the whole company was floated for just $600 million or $2 a share back in 1993-94.
Given that Stokes owns about 93 million shares, if Seven buys the full amount this time without its executive chairman participating, he will become the only majority controlling shareholder in an ASX100 company.
However, Stokes is remaining a man of mystery on this front and director Bruce McWilliam read out a statement off his blackberry which suggested Stokes wouldn't be participating at these levels.
Stokes has never sold a share in Seven but it is not clear if he would want to crack 50%. For instance, would this mean all that debt loaded up in the Seven joint venture with KKR would have to be consolidated onto his private company balance sheet?
The board didn't enjoy a few other comments I made such as suggesting this buyback would limit the company's ability to launch a full takeover bid for WA News. However, I also spoke in favour of the buyback because the market is concerned about Seven's largely undisclosed punting on the stockmarket with that $2.6 billion of KKR cash that was sitting on the balance sheet 12 months ago.
Seven had an excellent record when it came to horse trading in media and stockmarkets investments up until the current downturn.
For instance, Seven booked a $205 million on its Optus frolic, made $76 million out of Colonial Stadium in Melbourne and pocketed small gain on plays such as B Digital, PMP and Ticketmaster.
However, if you look at the more recent record it is more than $100 million underwater on WA News, has dropped more than $50 million on Perth-based engineering company GRD and has also done badly on plays such as Engin and Unwired.
Then, of course, there is the 5% stake acquired in James Packer's media rump which still hasn't been properly explained.
The ASX really should tell Seven it is now a listed investment company which should release a monthly statement on its net tangible assets.
Instead, we've got this $1 billion punt on various undisclosed stocks and the market is not happy.
In this environment another buyback is preferable to more stockmarket punting in plays such as GRD, which is chaired by Stokes' old mate Richard Court, the former WA Liberal Premier who sat with him at this year's WA News EGM.
It would have been nice to talk all these issues through with Stokes today, but the guy clearly doesn't enjoy public debate and his independent directors should have insisted that he turn up.
ABC radio Sydney and Alex the cartoon
Have a listen to yesterday's regular 702 ABC Sydney chat with Deborah Cameron and, check out this story on Inside Business last night on the stage show about The AFR's Alex cartoon. There are still tickets available for tonight's performance in Melbourne through this special offer. See you there, hopefully.
That's all for now.
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.