Last Monday in October, Packer AGMs, Transurban, Kennett and Tabcorp
February 19, 2010
Dear Mayne Reporters,
Let's start with a prediction. It's the last Monday in October, so today will be awful for global markets.
The Mondays in October 2008 have been terrible and it was Black Monday on Wall Street back in October 1987.
With Japan down 10% on Friday, the Australian market escaped relatively unscathed but after the Dow dropped another 312 points on Friday night, stand by for the All Ords to lose 100 points-plus today. For anyone with cash, the value looks amazing and I'm prepared to hazard a guess that today's awful environment might actually end up being the bottom.
Billionaire corporate raider Carl Icahn made a very interesting comment on Friday during the breakfast round table about shareholder activism put on by Sydney law firm Henry Davis York. He reckons senior debt is the best buying opportunity right now because in many cases it will end up owning the assets.
Indeed, with the world sinking in a sea of debt that is unravelling in vast numbers of margin calls, it is clear we are going to see one giant debt for equity swap. In many cases, it will actually be government-owned or guaranteed banks seizing control of the assets before they will be sold back to private investors over time. Vast amounts of equity has and will continue to be wiped out as global stockmarkets have now lost almost 50% of their value since last year's peaks.
Two dates with James Packer
PBL Media is a good example of what Icahn is talking about. The AFR reports today that James Packer has refused to stump up more equity into the highly geared owner of Channel Nine and ACP and will instead quit the board this week. It looks like the residual 25% equity stake Packer's Consolidated Media Holdings still owns in PBL Media is worth nothing, but you can buy into the senior PBL Media debt at just 60c in the dollar. That looks like good value as this debt will end up owning the assets.
James Packer does not enjoy our AGM encounters and in 2005 there was even this argument that he was scheduling to avoid us.
Alas, you certainly can't argue that in 2008 because James has brought both his AGMs to Melbourne and we'll be attending them this week.
Consolidated Media Holdings shareholders are gathering at Crown Casino from 2pm tomorrow and the discussion will be all about the disowning of PBL Media. You can bet your life that this media company won't be webcasting the event. We emailed through the "contact us" button on the CMH website but it went through to an old PBL page and failed to process.
CMH only claims to have net assets of $112 million when its beaten up market capitalisation is still $1.3 billion after the recent sell down. However, it does have about $70 million in net cash so in theory it should be out there raiding away on distressed media stocks.
Alas, James Packer doesn't appear to have much interest in media plays anymore. Indeed, another big issue for the meeting will be how they let Lachlan Murdoch get away with his $4.80-a-share privatisation proposal. The press reported at the time that James kept moving the goal posts to the point where Lachlan's consortium just had to walk.
CMH shares finished at $2.02 on Friday and is probably worth a buy order at $1.80 given the inherent value in the Foxtel, Premier Media and Seek stakes.
The Crown AGM on Thursday at Crown Casino will be a very different affair because this is a company carrying too much debt, $2.4 billion to be precise. Some of the expansions into Macau, Canada, the UK and Las Vegas have not worked and require significant further commitments. And who has got any spare cash to gamble at lavish casinos during this global meltdown.
Indeed, shares in Sheldon Adelson's Las Vegas Sands plunged by as much as 29% on Friday after confessing it needs to raise capital. If the world's biggest and most successful casino mogul is in strife, it looks like James Packer will have dropped billions getting involved in this debt-fuelled global casino land grab over the past three years.
We'll let subscribers now how these two big AGMs unfold during the week.
Today's big Transurban vote
Before the Packer encounters we'll have another fascinating AGM tonight given the expected protest vote against Transurban chairman David Ryan for his role as chairman of the ABC Learning audit committee.
The timing of the Transurban AGM could not be worse for Ryan given that ABC Learning has just pulled out of the $70 million purchase of its exclusive contract staff provider 123 Careers and faces potential chaos staffing its centres today.
As Ryan welcomes Transurban shareholders at 5.30pm tonight, he'll probably be wondering what is happending at the thousands of ABC Learning centres across the country as parents pick up their children.
Given the absolute shemozzle that was ABC Learning's audit process, Ryan should be voted off all other public company boards, starting with Transurban today. Proxy adviser Risk Metrics has recommended against Ryan but shareholders usually ignore the big proxy advisers on board votes, whilst following their advice on issues such as executive pay.
Indeed, both Risk Metrics and CGI Glass Lewis recommended against former Transurban chairman Laurie Cox two years ago but he was still re-elected with more than 90% in favour despite the obvious conflict of interest in being a Macquarie Bank executive director when both outfits competed in the tollroads space.
Ryan's fate is in the hands of the government run Canadian Pension Plan and the Ontario Teachers Fund which together own about 30% of Transurban.
One interesting line of inquiry today will be how Ryan managed to retain his Transurban shares when the margin call wiped out his ABC Learning stake entirely. Surely, he should have liquidated the Transurban stake and pledged more security against his ABC Learning loans to avoid becoming the most prominent Australian public company chairman to have been margin called in such a humiliating way.
A big commitment from Tabcorp
Paul Bendat from www.pokiewatch.org has blogged and produced a video celebrating the apparent commitment by Tabcorp CEO Elmer Funke Kupper to ban children from pokie venues.
The transcript of the exchange last Thursday was as follows:
Mayne question: "The first one is the whole luring of kids into our venues, you know, free food, playgrounds that aren't effectively supervised, a glass wall does not constitute supervision, children orientated entertainment, coin operated games of chance. Things like that are designed to lure children into our venues. I think we need to exclude children from our venues. I think we need to get ahead of the curve and make this a practice. No more children in our pokies venues. Point taken. That's it. We're ahead of the curve."
Elmer Funke Kupper response: "So for kids in venues it's hard to disagree with your basic point."
We look forward to reporting back on progress on this front.
A proxy for Jeff Kennett
Jeff Kennett is up for election at the AGM of Jumbuck Entertainment in Melbourne on Wednesday morning and we'd love to line up a proxy as I'll be in Sydney on a speaking gig with a union and also attending the Macquarie Media AGM.
Jumbuck starts at 10am at The Sebel on Collins Street if anyone is available.
Whilst snaring an AFL Premiership as Hawthorn President is a feather in the cap, the Kennett record on public company boards is absolutely woeful and Jumbuck has been no different, with the stock plunging from $1.30 to 42c over the past year.
This should not come as a surprise. Former Kennett Cabinet Minister Roger Pescott appears to have taken down more than $50 million with the collapse of Envirowest and even my old boss Alan Stockdale, the best Treasurer in Victorian history, doesn't have a flash record on public company boards.
Check out this broader wrap on the woeful public company records of former Liberals, along with this specific piece on Stockdale's tale of woe.
That's all for now. Hold onto your hats during this mad Monday of woe, but remember the old line about buying straw hats in winter.
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.
Let's start with a prediction. It's the last Monday in October, so today will be awful for global markets.
The Mondays in October 2008 have been terrible and it was Black Monday on Wall Street back in October 1987.
With Japan down 10% on Friday, the Australian market escaped relatively unscathed but after the Dow dropped another 312 points on Friday night, stand by for the All Ords to lose 100 points-plus today. For anyone with cash, the value looks amazing and I'm prepared to hazard a guess that today's awful environment might actually end up being the bottom.
Billionaire corporate raider Carl Icahn made a very interesting comment on Friday during the breakfast round table about shareholder activism put on by Sydney law firm Henry Davis York. He reckons senior debt is the best buying opportunity right now because in many cases it will end up owning the assets.
Indeed, with the world sinking in a sea of debt that is unravelling in vast numbers of margin calls, it is clear we are going to see one giant debt for equity swap. In many cases, it will actually be government-owned or guaranteed banks seizing control of the assets before they will be sold back to private investors over time. Vast amounts of equity has and will continue to be wiped out as global stockmarkets have now lost almost 50% of their value since last year's peaks.
Two dates with James Packer
PBL Media is a good example of what Icahn is talking about. The AFR reports today that James Packer has refused to stump up more equity into the highly geared owner of Channel Nine and ACP and will instead quit the board this week. It looks like the residual 25% equity stake Packer's Consolidated Media Holdings still owns in PBL Media is worth nothing, but you can buy into the senior PBL Media debt at just 60c in the dollar. That looks like good value as this debt will end up owning the assets.
James Packer does not enjoy our AGM encounters and in 2005 there was even this argument that he was scheduling to avoid us.
Alas, you certainly can't argue that in 2008 because James has brought both his AGMs to Melbourne and we'll be attending them this week.
Consolidated Media Holdings shareholders are gathering at Crown Casino from 2pm tomorrow and the discussion will be all about the disowning of PBL Media. You can bet your life that this media company won't be webcasting the event. We emailed through the "contact us" button on the CMH website but it went through to an old PBL page and failed to process.
CMH only claims to have net assets of $112 million when its beaten up market capitalisation is still $1.3 billion after the recent sell down. However, it does have about $70 million in net cash so in theory it should be out there raiding away on distressed media stocks.
Alas, James Packer doesn't appear to have much interest in media plays anymore. Indeed, another big issue for the meeting will be how they let Lachlan Murdoch get away with his $4.80-a-share privatisation proposal. The press reported at the time that James kept moving the goal posts to the point where Lachlan's consortium just had to walk.
CMH shares finished at $2.02 on Friday and is probably worth a buy order at $1.80 given the inherent value in the Foxtel, Premier Media and Seek stakes.
The Crown AGM on Thursday at Crown Casino will be a very different affair because this is a company carrying too much debt, $2.4 billion to be precise. Some of the expansions into Macau, Canada, the UK and Las Vegas have not worked and require significant further commitments. And who has got any spare cash to gamble at lavish casinos during this global meltdown.
Indeed, shares in Sheldon Adelson's Las Vegas Sands plunged by as much as 29% on Friday after confessing it needs to raise capital. If the world's biggest and most successful casino mogul is in strife, it looks like James Packer will have dropped billions getting involved in this debt-fuelled global casino land grab over the past three years.
We'll let subscribers now how these two big AGMs unfold during the week.
Today's big Transurban vote
Before the Packer encounters we'll have another fascinating AGM tonight given the expected protest vote against Transurban chairman David Ryan for his role as chairman of the ABC Learning audit committee.
The timing of the Transurban AGM could not be worse for Ryan given that ABC Learning has just pulled out of the $70 million purchase of its exclusive contract staff provider 123 Careers and faces potential chaos staffing its centres today.
As Ryan welcomes Transurban shareholders at 5.30pm tonight, he'll probably be wondering what is happending at the thousands of ABC Learning centres across the country as parents pick up their children.
Given the absolute shemozzle that was ABC Learning's audit process, Ryan should be voted off all other public company boards, starting with Transurban today. Proxy adviser Risk Metrics has recommended against Ryan but shareholders usually ignore the big proxy advisers on board votes, whilst following their advice on issues such as executive pay.
Indeed, both Risk Metrics and CGI Glass Lewis recommended against former Transurban chairman Laurie Cox two years ago but he was still re-elected with more than 90% in favour despite the obvious conflict of interest in being a Macquarie Bank executive director when both outfits competed in the tollroads space.
Ryan's fate is in the hands of the government run Canadian Pension Plan and the Ontario Teachers Fund which together own about 30% of Transurban.
One interesting line of inquiry today will be how Ryan managed to retain his Transurban shares when the margin call wiped out his ABC Learning stake entirely. Surely, he should have liquidated the Transurban stake and pledged more security against his ABC Learning loans to avoid becoming the most prominent Australian public company chairman to have been margin called in such a humiliating way.
A big commitment from Tabcorp
Paul Bendat from www.pokiewatch.org has blogged and produced a video celebrating the apparent commitment by Tabcorp CEO Elmer Funke Kupper to ban children from pokie venues.
The transcript of the exchange last Thursday was as follows:
Mayne question: "The first one is the whole luring of kids into our venues, you know, free food, playgrounds that aren't effectively supervised, a glass wall does not constitute supervision, children orientated entertainment, coin operated games of chance. Things like that are designed to lure children into our venues. I think we need to exclude children from our venues. I think we need to get ahead of the curve and make this a practice. No more children in our pokies venues. Point taken. That's it. We're ahead of the curve."
Elmer Funke Kupper response: "So for kids in venues it's hard to disagree with your basic point."
We look forward to reporting back on progress on this front.
A proxy for Jeff Kennett
Jeff Kennett is up for election at the AGM of Jumbuck Entertainment in Melbourne on Wednesday morning and we'd love to line up a proxy as I'll be in Sydney on a speaking gig with a union and also attending the Macquarie Media AGM.
Jumbuck starts at 10am at The Sebel on Collins Street if anyone is available.
Whilst snaring an AFL Premiership as Hawthorn President is a feather in the cap, the Kennett record on public company boards is absolutely woeful and Jumbuck has been no different, with the stock plunging from $1.30 to 42c over the past year.
This should not come as a surprise. Former Kennett Cabinet Minister Roger Pescott appears to have taken down more than $50 million with the collapse of Envirowest and even my old boss Alan Stockdale, the best Treasurer in Victorian history, doesn't have a flash record on public company boards.
Check out this broader wrap on the woeful public company records of former Liberals, along with this specific piece on Stockdale's tale of woe.
That's all for now. Hold onto your hats during this mad Monday of woe, but remember the old line about buying straw hats in winter.
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.