News Corp AGM, Packer, Fairfax, James Strong, Eastern Golf, NAB and Ten tilts, Woolies, Kohler-Gatto and much more
February 19, 2010
Dear Mayne Reporters,
apologies it has been two weeks between editions but here's hoping you'll find there is plenty of lively material to digest.
All huff and no proxies at 2009 News Corp AGM
After six straight years of encounters with Rupert Murdoch at News Corp's Adelaide AGMs from 1999 until the sad farewell for New York in 2004, The Mayne Report has been attempting to visit the Big Apple every second year for a re-union with the Sun King. Alas, we've now missed two in a row.
Unfortunately, our two proxies didn't make it to the Lexington Avenue hotel on Friday night for the annual meeting of stockholders in what is now a Delaware-registered outfit. This made my pre-AGM spruiking on the Murdoch-managed Foxtel through the Sky News Business Channel on Friday afternoon a touch embarrassing as you can see here.
Below are the suggested questions we had for our missing proxies but despite none of them being directly asked, the full audio of the AGM still made for quite interesting listening. For instance, have a listen to crazy former s*x worker Evelyn Davis bang on for 14 minutes.
The best shareholder contribution came from Cliff Kincaid from Accuracy In Media, who extracted a confession from Rupert that Fox News had just fired a notorious supporter of cop killers. Have a listen to Cliff's excellent seven minutes of exchanges and check out his press release trumpeting the sacking.
When will Rupert learn how to run a meeting?
One again, Rupert demonstrated his inability to run a proper shareholder meeting, even ignoring his own rules. At the start of the AGM, Rupert claimed shareholders would be restricted to 2 questions over 1 minute. He also said general questions should be left until the end. The precise words were as follows:
You will have an opportunity to ask questions after all matters have been submitted to stockholders to vote are presented. Please hold your questions until that time. Before asking your questions please state your name and affiliation. As noted in the rules of the meeting, each person is limited to two questions that should be no longer than a minute in length. I now call for questions and answers.
Lo and behold, Evelyn Davis was allowed to rave on across a range of issues before the specific business had been dealt with.
Clifff Kincaird took Rupert to task for being so paranoid in his controls over media access, which this year extended to banning the traditional post-AGM press conference. His key words were as follows:
Cliff: "Mr Chairman, Cliff Kincaid again, Accuracy in Media, I must say these rules and procedures, for a company devoted to the first amendment, are absurd! Prohibiting the taking of photographs and the use of audio and video recording equipment, what is, this the Federal Reserve? To the credit of Fox News, it has gone to court to get information from the Fed on how they are spending our money. Please don't emulate the Fed and try and prohibit the taking of photographs or the use of audio or video recording equipment, in what is really a public meeting, this is a public company. You haven't adhered to this, restricting questions to no longer than one minute, I mean you get more than that on The O'Reilly Factor.
Rupert: All right, just, c'mon (laughs)
Cliff: You oughta re-do these rules and procedures, for a first amendment company, c'mon.
We finally got to Rupert's formal presentation after forty minutes of debate. Have a listen to his fifteen minute address.
Once Rupert finished his speech, the meeting was concluded without any general questions being asked or encouraged.
Meanwhile, watch last year's AGM video where our proxy managed a couple of questions between the crazy rantings of Evelyn Davis and then Rupert brazenly broke his promise to allow for general questions at the end.
With Rupert clearly being unable to run a proper meeting once a year, the argument for an independent News Corp chairman becomes even stronger, especially as we get closer to the all-important succession decision.
The question we'd hoped our proxy would ask Rupert
Have a read of these questions we'd prepared for our two no-show proxies. Just to get a couple of them asked of Rupert would have made for a much more interesting News Corp AGM:
Opening preamble
Chairman last year at the start of the AGM you promised general questions at the end of the meeting but when we got to the end you closed the meeting without asking for general questions. This morning can you please clearly state when you will be asking for general questions and also outline how you would like to handle specific questions that shareholders might have on individual items of business on the agenda.
General questions: Google
Chairman you called aggregators such as Google kleptomaniacs or serial thieves in China last week. How are relations with Google at the moment and is this sort of intemperate language very helpful? Will Google ever come back and do another lucrative Myspace advertising deal if you keep slinging accusations like that around?
Fighting with Obama
We've all sat back in amazement in recent days watching the White House declare that our company is at war with the Obama administration. From a shareholder perspective, is this a sensible move? Are we making so much money out of Fox News that it is worth jeopardising the odium associated with being the biggest critic of a President who is so admired around the world?
Fighting with Gordon Brown
Rupert, were you involved in the decision by The Sun to back the Tories just before Gordon Brown was about to address the big Labor Party conference? Isn't there a risk here such an aggressive move will lead to further regulatory sanctions against our interests in the UK, such as the move by regulators to block our investment in ITV at a cost of hundreds of millions of dollars for News Corp shareholders?
Compared to other media giants
Rupert, two years ago at the AGM you crowed that News Corp had become the most valuable media company in the world. These days Disney is capitalised at $US55 billion and we are struggling along at $US34 billion. Why have we lagged so far behind Disney over the past two years?
Chernin
Are we missing Peter Chernin since he left? Why was his termination payout so generous and what is the current status of his film deal with the company?
Executive pay
Rupert, your pay was cut to a still excessive $US20 million last year, any chance of this falling back to more realistic levels this year and why do you need such a pay packet when you own $3 billion worth of stock?
Rudd
Chairman, you had dinner with Australian prime minister Kevin Rudd the other week. Do you rate him and are you going to back him at next year's federal election? If so, why is our flagship newspaper, The Australian, running such a bitter campaign against the Rudd Government?
Praise and more praise at JB Hi Fi AGM
The AGM season kicked off in earnest last Wednesday when JB Hi Fi, CSL and Ansell all gathered before shareholders in Melbourne.
It would have been possible to take in all three meetings by starting with CSL at 10am, leaving Melbourne Park in a taxi at 11.15am and then getting to Computershare's Abbotsford digs for JB Hi Fi at 11.30am. JB have never had an AGM go longer than 45 minutes so it would have then been easy to then get into town for Ansell at the RACV Club in Bourke St from 2pm.
Alas, with three Manningham Council commitments last Wednesday, plus the regular spot on 774 ABC Melbourne, this was always going to be a stretch so we settled on just attending JB Hi Fi.
Chairman Patrick Elliott joked at the end of the meeting that we had more questions than in the previous six years combined. This just sums up the problem in Australia - AGMs still lack decent debate.
Anyway, below is the edited audio from the JB Hi Fi AGM last Wednesday where the vast majority of my contributions lavished praise on a board which have flogged Woolies and taken a $1 stock through $20 in six years:
Well done in rejecting takeover advances from pokies giant Woolworths
Mr auditor, can we make our conservative balance sheet look any more realistic?
Chairman Patrick Elliott should commit for full three year term
Approving more options for excellent CEO and his successful deputy
Is CEO Richard Uechtritz going to sell any more shares?
Pay the non-executive directors more money for such good performance
Woolworths board tilt falls over
For the second year straight, a nomination for the Woolworths board fell over due to it not being timely. Your silly correspondent assumed it would be the normal 35 business days notice period when it was 45. Not to worry, we'll still be at the AGM in Sydney on November 26 supporting this S249P statement that will be sent to all Woolies shareholders and was put together by Senator Nick Xenophon and anti-pokies campaigner Paul Bendat.
Having failed to get the act together for a Woolies tilt, the decision was made to proceed with early lodgement of nominations for the boards of Ten Network Holdings and National Australia Bank. Both have been accepted, meaning there will be three tilts before the end of the year on the following platforms:
Ten Network Holdings platform as submitted
Mr Mayne is standing for the board on the single issue platform that Ten Network Holdings Ltd (TNHL) offer its 22,000 retail shareholders a share purchase plan at $1.15 a share – the same price paid by institutions in the selective $138 million placement completed in August 2009. TNHL is one of only three ASX150 companies over the past two years to have raised capital selectively from institutions without offering its retail shareholders any opportunity to increase their investment. The other two are Perth-based mining houses Fortescue Metals and Paladin Resources. With CanWest now gone from the TNHL register there is no excuse for the company not to follow the lead of top 50 companies such as Macquarie Group, ANZ, NAB, Qantas, Lend Lease, Westpac, Crown, CSL, Newcrest, Sonic Healthcare, Tabcorp, Lend Lease, Asciano, AMP, Axa and IAG which all offered retail investors a share purchase plan after a selective institutional placement on the same terms. By refusing to do an SPP, the TNHL directors have consciously diluted their retail shareholders as a class to the tune of many millions of dollars. Such treatment, especially in the wake of repeated correspondence on this matter, makes it appropriate for retail investors to now appoint a new director to more vigorously represent and protect their interests.
Fairfax Media platform as appears in the notice of meeting
Stephen offers Fairfax much-needed internet experience as the founder of www.crikey.com.au, Australia's best known independent ezine and a rare example of online journalism being commercially successful. Stephen also understands the radio industry having been a regular ABC commentator in Melbourne and Sydney over a decade, a guest ABC presenter and, more recently, a regular guest on Fairfax's 4BC in Brisbane. After the expiry of his non-compete agreement with Crikey in March 2009, Stephen is free to offer his internet, newspaper, radio and corporate governance experience to the Fairfax Media board. Since November 2008 Stephen has served constructively on Manningham City Council, which has more than $1 billion of assets, 650 staff and $90 million of annual revenues. This has provided valuable experience in a non-executive governance role, including serving on the audit committee. Stephen supports the current Fairfax management team and would be a genuinely independent director, treating issues on their merits irrespective of personalities or individual shareholders.
NAB platform as submitted to company secretary
Mr Mayne is standing for the NAB board as a protest after the board elected to substantially dilute retail shareholders by returning $1.85 billion of the $2.6 billion worth of applications for its share purchase plan in August 2009. By way of contrast, ANZ accepted the full $2.2 billion worth of applications in its recent SPP. Similarly, Macquarie Group also ended up raising more from its retail shareholders through an SPP than from an earlier institutional placement. NAB's retail shareholders as a class have foregone paper profits worth more than $500 million courtesy of the board's decision to be the first major Australian bank to ever scale back an SPP. Despite owning close to 40% of NAB, retail shareholders have only contributed $1 billion of the $6 billion of new equity capital raised over the past year. NAB chairman Michael Chaney is ultimately responsible for this decision and wrote a letter to shareholders on August 31 after the outcry caused by all applicants being savagely scaled back by 71% to just 202 new shares. Mr Chaney is up for election at the AGM and Mr Mayne urges shareholders to send a strong message by voting against the chairman. Mr Chaney's letter justified the scale back, in part, on the grounds that “it is not in shareholders' interest for the company to hold excess capital”. Yet just 18 days later NAB raised $US600 million in Tier 1 hybrid capital notes and a further $US500 million of this capital was raised on September 30. NAB could and should have accepted at least some applications above the arbitrary limit of $750 million for the retail offer. Indeed, the likes of ANZ, QBE Insurance, Crane Group and Adelaide Brighton have all announced caps and then accepted more applications in various SPP offers in 2009. The NAB board consciously diluted their retail shareholders as a class to the tune of several hundred million dollars. Such treatment makes it appropriate for retail investors to now appoint a new director to more vigorously represent and protect their interests.
It will be very interesting to see if the NAB and Ten boards try to censor the platform because both have egregiously shafted retail investors and we've never before seen a board tilt in Australia based solely on a retail rights platform.
Fairfax pulls the no vacancy card
This brief statement was sent by your candidate correspondent to journalists after Fairfax Media released the notice of meeting for its AGM two Thursdays ago, but there has barely been a ripple about the no vacancy rort in the mainstream media.
The peace accord reached after the New Zealand board meeting has most observers believing the three outside candidates do not stand a chance with incoming chairman Roger Corbett having won over the key institutional investors.
It also passed largely unremarked that Ron Walker's progressively expedited departure took another step forward last week when he agree to relinquish the chair on October 30.
This will give Corbett ten days to settle in and present his pitch to the shareholders on November 10. If Ron Walker wanted to do his great mate a favour, he would not attend the AGM at all.
Instead, Ron keeps on claiming to have saved the venerable media outfit when in fact the Fairfax share price has grossly underperformed on his watch and the company was forced to conduct an emergency capital raising at the peak of the financial crisis to pay down its excessive debts after his takeover binge.
News Corp and the push for paid newspaper content
Mark Day had this very interesting column in The Australian's Media section yesterday correctly pointing out that the Murdoch push to charge for newspaper content was far more sophisticated than simply imposing a payment gateway around existing free content.
News Corp is looking at building valuable social media networks around its existing newspaper subscriber base. Pay for the newspaper to be delivered and you'll get plus, plus, plus. It's no different from any other concept of bundled products.
This all sounds very sophisticated and sensible but it doesn't solve the major problem - classified advertising revenue leeching to non-journalistic websites. However, News Ltd was very clever in getting control of www.realestate.com.au and have used all their existing newspaper properties to heavily promote the property sales website whilst enjoying paper gains of almost $500 million on its controlling 60% stake which is worth $620 million as the stock powered through $8 yesterday.
This ties in to the debate about the business records of James Packer and Fairfax Media. There were three fortunes to be made from online classifieds in Australia and Fairfax missed them all. James Packer may have squandered almost $2 billion on offshore casino plays but he cleaned up with Seek and Carsales whilst it was News Ltd that scored the coup with realestate.com.au
That said, Murdoch has clearly blown up billions paying $6 billion for Dow Jones and myspace has also been a $500 million-plus debacle given it still loses money and has also lost momentum with no obvious path to profitability.
Big governance speech to superannuation conference
The Super Ratings "Day of Confrontation" at Docklands last Tuesday was a sell out with more than 300 industry figures turning up for a feisty day of debate before the big awards night.
It was lucky that the Donvale Probus Club cancelled an 11.15am address last Tuesday on concerns my 40 minute Day of Confrontation speech wouldn't finish at the scheduled time of 10.35am. Indeed, the conference started 15 minutes late and Peter Costello didn't sit down until about 10.40am, emulating Paul Keating's effort in going way over time at last year's conference.
This may have been Peter Costello's last big public speech before yesterday's farewell from Federal Parliament, but at least he went to the effort of watching the video of Paul Keating's presentation and even re-running aspects so he could de-bunk the father of super. The expression of regret about the super surcharge being far too complex was also commendable.
Cossie didn't stick around for any of my observations but I opened up with a gentle response to his overblown claims of fiscal achievements and then proceeded to challenge the super industry to get more active.
We don't usually present videos of big speeches, but the audio quality and lighting was good, so you can check it out in full here.
The key points were a challenge to the industry to improve their own governance whilst getting tougher on dud directors of public companies. I revealed certain direct tactics used on BrisConnections chairman Trevor Rowe, former AMP chairman Stan Wallis and Ron Walker at Fairfax and then challenged the industry to do the necessary heavy lifting to get former ABC Learning chairman David Ryan out of the chair at tollroad giant Transurban.
We'll see how long it takes them and also check on progress with Ryan himself at the upcoming Transurban AGM
* Check out the speeches feedback page on our website.
McCrann continues to lead defence of retail investors
This list tracks all the web accessible columns by Australia's major business commentators about the extraordinary rorting and dilution of retail shareholders that has been going on during the record-breaking $100 billion capital raising binge over the past 12 months.
Terry McCrann has clearly been the stand out defender of retail interests and he produced another good column about the weird Ramsay HealthCare scale back on October 6.
Frith makes good point about retail bookbuilds
The Australian's Bryan Frith also stepped into the debate with this column on October 9, focusing on the fact that non-participating retail investors tend to get less compensation from book builds to sell shortfalls because the institutional bidders have usually already got their fill of stock through the earlier institutional offer. The key statistics he presented were as follows:
FKP's issue price was 40c a share. The institutional shortfall cleared at 46c a share, giving the non-subscribing institutions 6c a share, but the retail shortfall cleared at the 40c issue price, leaving nothing for the retail investors. In the case of Transpacific and Prime Media, both the institutional and retail non-subscribers received nothing for their rights, while in ConnectEast the institutions received 3.5c a unit but the retail holders received only 0.5c a unit.
The retail component of Sigma's $297m one-for-three renounceable issue closed yesterday. The issue was at $1.02 a share, and the institutional shortfall went off at $1.07, giving the institutions that did not subscribe a payment of 5c a share. Retail investors make up 55 per cent of Sigma's share register, so the company would have been hoping for a solid response. However, Sigma reported yesterday that retail investors took up only 50.7 million shares, or 32 per cent of the retail component, leaving a shortfall of 109.5 million shares, equivalent to 38 per cent of the entire raising. Not surprisingly, the retail bookbuild went off at the $1.02 issue price, leaving nothing for the holders that did not take up their entitlements.
These points are all correct, but that doesn't mean retail investors shouldn't still be offered some compensation when not participating, especially the foreign shareholders who are ineligible to apply.
I delivered a key note and then participated in a panel discussion at a capital raisings conference in Sydney last Thursday when all of these sorts of issues were discussed in great detail.
For mine, the fairest way to raise capital is through what's called an AREO - Accelerated Renounceable Entitlement Offer.
The trick is to offer every single shareholder the same heavy discount, allow rights trading for those who wish to exit quickly or partially and then also invite everyone (retail and institutional) a chance to bid for the shortfall through a market mechanism. If the bids fall short, then the stock can be given away to those shareholders applying for so-called "overs". And if the discount is big enough, there often won't be any need to pay all those egregious under-writing fees to the highly conflicted gouging advisers such as Macquarie and UBS.
Cornwall's solution for the boats
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Woolies, pokies, shareholder statements and James Strong
We wrote this story for the September 15, 2009 edition of the The Mayne Report:
Help get the S249P statement up for Woolies
I've never before been involved in gathering the required 100 signatures necessary for what's called a S249P statement to be distributed to all shareholders in the notice of meeting ahead of an AGM. Indeed, it has happened less than 20 times in Australia as can be seen from this list.
However, Senator Nick Xenophon is a politician who understands what can be achieved with some shareholder activism and he is sharpening his focus on the Woolies board over the 12,000 pokies run by Australia's biggest retailer.
The Senator's home page includes a big picture of Woolies with the words “fresh food” crossed out and replaced by “pokies”. However, he's gone a step further and is soliciting for the required 100 shareholder signatures to get this proposed 249P statement sent to the company's 300,000-plus shareholders.
Woolies have also agreed to hand over an electronic copy of their share register to Paul Bendat, who is working with Senator Xenophon on this campaign. Check out Paul Bendat's excellent pokieact.org website.
On 29 September Nick Xenophon's office was successful in gathering 100 signed 249P statements. In fact, with more than a week to go, over 230 statements were received and the board has confirmed it is valid.
Is the James Strong career headed for a fall?
For mine, the Woolies S249P exercise will be the most interesting thing to watch during the AGM season, although the expected huge protest vote against the Qantas remuneration report and remuneration committee chair James Strong at the AGM in Perth tomorrow will also generate plenty of headlines.
Strong, of course, is the Woolies chairman who oversaw the huge push into pokies. Now he also seems to think it is just fine to chair a ASX-listed second retailer in Kathmandu. Surely the bloke is already way too busy with his other commitments. Strong clearly hasn't taken the time to closely investigate the Woolies pokies practices like his counterparts at Wesfarmers have done.
And with his credibility dented at Qantas over that huge payout to his old mate Geoff Dixon, maybe it is time Strong also departed the Woolies chair. After all, who else chairs two listed retailers at the same time?
Productivity Commission targets concessional treatment of pokies clubs
The Productivity Commission report on not-for-profits came out last week and we noticed this particularly interesting paragraph:
The other competitive neutrality issue raised is in regard to registered clubs and the considerable benefit they derive from concessional treatment of gaming revenue by their state or territory, benefits not available to hotels and other operators. Clubs do provide valuable community benefits through their support of community activities, but it is unclear that the benefit delivered is sufficient to warrant the concessional gaming tax treatment, given their impact on competitive neutrality. The Commission has not made draft recommendations in these areas which will be subject to more detailed examination as part of the Australian Future Tax System Review.
That's the PC's bold italics not ours.
The detail is in Section 8.4 of the full report for a few pages. There is no detail on how they made the value judgement about 'sufficiency'. The PC clearly did not like the pokies clubs going into other businesses when they had this tax advantage.
As we all get ready for the PC's latest report on pokies, which is being released tomorrow, it is clear Ken Henry's tax review will take in the whole situation of state-based pokies taxes. Maybe that will be the mechanism Kevin Rudd belately uses to attack the pokies which he professed to "hate" when Opposition leader but has done little to combat since moving into The Lodge.
Managing community expectations at Eastern Golf
Save for preparing for the forthcoming fire season, arguably the biggest issue confronting us Manningham councillors at the moment is the future of the 47ha Eastern Golf course located strategically between the Eastern Freeway and the booming redeveloped Westfield Doncaster.
A couple of weeks back the three Koonung ward councillors - mayor Charles Pick, deputy mayor Fred Chua and Ivan Reid - hosted a ward meeting in the council chamber which attracted almost 100 residents, many of whom were keen to vent their spleens.
The planning department did a very good job preparing some informative overhead slides and Paul Molan, our director of Planning and Environment, was an absolute trooper in calmly but firmly explaining where we all stood over the 145 minute meeting.
As a passive observer at the rear of the room, there was clearly a massive disconnection between the demands of the community and the reality of the situation.
At the end of the day, this is arguably Melbourne's best in-fill residential development site located on privately owned land which is already zoned residential. The state Planning Minister Justin Madden has already suggested it be rezoned to allow even more intense development.
Yet in listening to the community, the attention was still very much focused on why the council didn't buy the golf course or demand things such as a 100 metre buffer zone between any newly constructed dwellings and the existing residents living on the boundaries.
Whilst mayor Charles Pick has in the past championed the cause of residents in trying to preserve the site as a golf course, he did well to clearly communicate that council risked having the whole process taken away from it by the state government if we put up unrealistic proposals, such as a demand for huge tracts of public open space to be handed over by the developer.
Charles mentioned our recent dinner with Boroondara council which now laments being too ambitious on the Kew Cottages site which ended up being completely determined by the state government after a big donation from billionaire Sydney developer Lang Walker who at the time was being advised by Graham Richardson.
Walker Corp then sold the site to Mirvac which has proceeded with a $500 million-plus development with little involvement from Boroondara council. Ironically, I'll be catching up with Mirvac chairman James MacKenzie today when he dons his other hat as chairman of Pacific Brands at the AGM.
Unfortunately, this gig kicks off at 10am in Albert Park and then there is a meeting with an ASX50 chairman in town at midday, so I'll be exiting the PacBrands debate before the two hour mark.
Audio breakdown of latest public council meeting
Manningham City Council held a public council meeting on Tuesday, September 29, 2009. Check out the agenda and minutes. Below are links to edited audio of our contributions to the public debate which was also discussed in the last edition.
Speaking in favour of public exhibition of Matthews property re-zoning proposal
Endorsing emissions targets
Closing debate on Wonga Park development proposal which went down 5-4 - rest of debate
Should we ban grog at big festivals?
Tight 5-4 vote to save fireworks at carols by candlelight
Full contentious debate on Kiwanis raffle – Stephen comments
State legislation banning political staffers
Finally on Manningham, all the edited audio highlights from public council meetings since April are available here.
More Cornwall cartoons for The Mayne Report
Former Fairfax and Crikey cartoonist Mark Cornwall has been contributing his satirical commentary to the Mayne Report since March 2009. Here is a collection of his best cartoons and there are also now some amusing animations. Go here to see his animations and below are some new offerings:
Alan Kohler's Mick Gatto apology
The following appeared in Alan Kohler's Saturday morning email update to Eureka Report subscribers on October 10. I remain in the camp of being horrified that a blue-chip public figure like AK would ever consider such an association, let alone sort-of defend it after the all-too-predictable backlash:
The really big highlight of the week, or lowlight depending on your point of view, was the launch of Mick Gatto's memoirs, which I hosted as chairman of Melbourne University Publishing. I began my opening speech as follows: “A lot of people ask us why MUP is publishing a person like Mick Gatto. The answer is that just because we're a university press doesn't mean we only publish boring books that no one buys.”
But while I was, and am, unapologetic about publishing Gatto's memoirs because I think it will make MUP a lot of money, many of my family and friends – in which I include you – are not happy about me associating with gangsters. My wife is not happy. My best pal (a prominent judge) is far from amused. Some subscribers have written to us expressing their disgust. My kids thought it was it was a hoot, of course. And some of my friends actually came to the launch to soak up the atmosphere.
Anyway, if seeing me launch Mick Gatto's memoirs upset you, I sincerely apologise. I can assure you it does not mean Eureka Report has any less integrity or that I am going soft on crime. It was just a book launch.
It has been equally surprising that this sort of debate hasn't really played out in the media. If Alan is apologising to his Eureka Report subscribers, what about the 1 million-plus Australians who watch him deliver the finance report on ABC television each evening? After all, it's hard to imagine the BBC's finance guru launching a prominent gangster book.
Most recent Mayne Report editons
Sign up here to receive the weekly Mayne Report member editions for free and you can also see an archive of all editions from 2008 and 2007. If you've only just got on board or missed some recent missives, try these for size:
October
ASX AGM, Fairfax, capital raisings, MAP, Bulleen Boomers, Manningham, classic Cornwall, AGM schedule and much more
October 5, 2009
September - 4 editions
Compass, MAP, dodgy SPPs, exec pay, Mirrabooka AGM, Manningham, capital raisings, Rich List and much more
September 26, 2009
Fairfax, RACV elections, MAP, capital raisings, Manningham, Wallis, hostile EGMs, video, AGM diary, rich list and much more
September 22, 2009
Bad Bendigo, Mark Day, Manningham, pokies, NAB, Asciano, Rich List, Paladin, hostile EGMs and much more
September 15, 2009
Elders rip-off, NAB excuses, Woolies grog push, Virgin scale back, Australand windfall, McCrann, Walkleys, activism, Macek, AMP and much more
September 8, 2009
From the archive: Rupert, Babcock, Brisconnections and ABC Learing
We're introducing a new regular feature called "From the Archive" which highlights some favourite encounters from over the years. Part of the theme in this edition is picking trouble early:
Final Mayne Report for 2007 - time to avoid ABC Learning
Monday, December 24, 2007, 3:52pm
Brisconnections tanks with conflicts and spin everywhere
July 31, 2008
News Corp AGM edition
6 stories - Saturday, 22 October, 2005
Great debate at the Babcock & Brown AGM
May 30, 2008
The latest capital raising plays
Check out this complete chronological list of all capital raising plays in 2009 and at the bottom is a list of the 20 or so upcoming offers.
There's also this version ranking the top 60-plus plays since January. For the latest shuffles in our ridiculously large tiny share portfolio, check out all trades in 2009 plus the full portfolio of more than 700 holdings. The October capital raising gains so far have amounted to $7471, which breaks down as follows:
October 16
Industrea: $15,000 into SPP at 40.92c and then exited at 44.5c for a profit of $1285.
Isoft: $15,000 into SPP at 77c and then exited at 86c for profit of $1755.
October 12
Healthscope: $15,000 into SPP at $4.19. Exited at $4.59 for a profit of $1431.
October 9
Folkestone: $7,200 into 2-for-1 entitlement offer at 15c. Got the lot and exited at 15.5c to make profit of $240.
October 5
Clarius Group: $20,000 into 1-for-3.5 entitlement offer at 64c but scaled back to just 10 new shares as formula was 2.3 times entitlement.
October 7:
Cougar Energy: exited two scaled back $15,000 SPPs at 8.25c for 9.9c to make a profit of $2600.
Ramsay Healthcare: exited three heavily scaled back $15,000 SPP offers at $9.835 for average $10.52 to make profit of $200.
October 8
Gunns: $18,000 into entitlement offer at 90c. Scaled back to virtually nothing.
Offers we're currently committed to
This list tracks all applications we've made in current capital raisings offers which will peak this Friday when Myer, Boart Longyear and Brickworks all close:
Amadeus Energy: $5000 into SPP at 26c. Closed October 16 and trades October 23.
AWB: $25,200 so far into two 1-for-1 entitlement offers at $1 with ability to apply for extra. Closes October 21.
Bass Strait Oil: $10,000 into 2-for-3 entitlement offer at 3c with extras. Closes October 20 and trades October 29.
Boart Longyear: $15,200 so far into two $15,000 SPP at 27c which closes October 23 and trades November 5.
Brickworks: $9994.40 so far into $15,000 SPP at $12.40 which closes October 23 and trades November 3.
CMA Corp: $15,000 into SPP at 10c which closed October 8 and trades October 20. No scale back.
Elders: $30,000 so far into two $20,000 SPP entitlements at 15c. Closes on October 23 and trades November 3.
FEA: $10,000 into 1-for-1 offer at 7.5c with no scale back of extras. Closed October 14, trades October 23.
Myer: $10,500 so far into flying blind offer through being the owner of 1 note. Closes on October 23 and trades November 2.
Real Estate Capital Partners: $15,000 into SPP at 15c or 7.5% discount. 15% scale back and trades on October 21.
Redflex Holdings: $10,000 into 1-for-12 entitlement offer at $2.04 but scaled back to virtually nothing. Trades October 20.
Watpac: $30,000 into three $15,000 SPPs at $1.25 but scaled back to 2110 shares. Trades October 23.
Total live applications: $145,932
Refunds outstanding
Watpac: $27,363
Redflex: $9800
RCU: $2100
Total funds committed: $185,395 (includes more than $20,000 borrowed from third parties)
AGM season diary is up and running
There was a brief appearnce on Lateline Business on October 5 discussing the beginning of AGM season.
More importantly, we've put together this comprehensive diary of what lies ahead. Check it out and send in any corrections or additions to stephen@maynereport.com.
After all the debate about James Packer caused by Paul Barry, the Crown AGM in Melbourne on October 28 will be a corker. I've been encouraging Barry to come to the meeting and ask some questions but without any luck thus far.
Mayne Report video blog
We have been put together playlists of videos covering similar topics and additionally, collections of videos from television appearances. Check out these special edition videos here.
Watch this excerpt on commentary about James Packer that appeared on 4 Corners last week:
Press Room and podcasts
Below are the latest contributions to the press room:
Radio
774 ABC Melbourne - with Bruce Guthrie discussing Fairfax, AGM season and JB Hi Fi on October 14.
774 ABC Melbourne - with Lindy Burns discussing Costello, banks and the world of finance on October 7.
Sky Business View - watch these videos where we discuss CBA's ASIC fine, a cheeky grab about Fairfax, the JB Hi Fi AGM and the 2009 News Corp AGM, on Friday, October 16
The Mayne Report Rich List
Since we began compiling the Mayne Report Rich List documenting Australians currently or previously worth more then $10 million, it has grown in numbers and popularity such that no other feature on our website can match it for traffic. Here are a couple of new entries:
Dennis and Graciela Mcgillicuddy: large individual shareholders of Industrea with around 15.2 million shares or 8%.
Jeffrey and Karen Schiller: joint shareholders at Medusa Mining with about 2%. Add to this joint holdings in the Independance Group of just under 2 million shares or 1.6%, which pushes their wealth above our $10 million cut-off.
Anthony Wooles: is the founder of maintenance company Pearl Street. He holds around 38 million shares in the company which pushes his wealth north of $20 million.
All the recent share trades
Check out all the trades so far this year and here's the world's biggest small portfolio which on October 9 stood at 721 holdings worth $56,622. The overall paper loss was $9,062 and average holding just $81. Anyway, here are most of the recent trades:
October 16
Praemium Investors: bought 2,565 at 19.5c
October 14
Marmota Energy: bought 5,423 at 18.7c
Carsales.com: sold 122 at $3.89
Chemgenex sold 705 at 73.5c
Extract Resources: sold 46 at $10.03
Lynas Corp: sold 731 at 58c
Macarthur Cook: sold 1,779 at 25c
Milton corp: sold 23 at $17.85
Molopo: sold 425 at $1.19
Prime Media Group: sold 760 at 76.5c
Rock: sold 250 at $1.90
Traffic Technologies: sold 8,611 at 6c
Transurban: bought 116 at $4.32
Qantas: sold 235 at $2.96
October 13
Pan Pacific Petrol: bought 1,087 at 46c
October 12
Capral: bought 14,543 at 7c
Cash Converters: bought 878 at 57c
Healthscope: sold 3,594 at $4.59
Little World Beverages: bought 256 at $1.96
October 9
Folkestone: sold 48,000 at 15.5c
October 8
Adelaide Managed Unit: bought 385 at $1.30
October 7
Caspian Oil and Gas: bought 52,632 at 1.9c
Cougar Energy: sold 158,182 at 9.9c
Ramsay Healthcare: sold 358 at $10.54
October 6
Babcock&Brown Power: bought 6,757 at 7.4c
Campbell Brothers: bought 18 at $28
Willmot Forrest: bought 1,852 at 50c
October 5
Molopo Australia: bought 435 at $1.15
Mayne Report RSS Feeds
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Sign up for Mayne Report Tweets
We have only been twittering for a few months, but now have almost 900 followers and are regularly dropping out the latest developments from AGMs, capital raising plays and even Manningham Council. Sign up below to get the latest updates from all our activity and check out some of the latest tweets :
10:43am Oct 12th
Exited Healthscope share purchase plan for gain of $1550. Getting ready for latest ABC Learning creditors committee meeting at noon.
9:02pm Oct 7th
Fairfax notice of AGM out. 4 chasing 2 spots due to no vacancy rort: http://imagesignal.comsec.c...
9:52pm Oct 6th
regular chat on 774 ABC Melbourne discussing the world of finance http://bit.ly/BS5pD
2:22pm Oct 6th
Exited Cougar and Ramsay SPPs for gain of $3100. See full list of plays: http://bit.ly/QZieV
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.
apologies it has been two weeks between editions but here's hoping you'll find there is plenty of lively material to digest.
All huff and no proxies at 2009 News Corp AGM
After six straight years of encounters with Rupert Murdoch at News Corp's Adelaide AGMs from 1999 until the sad farewell for New York in 2004, The Mayne Report has been attempting to visit the Big Apple every second year for a re-union with the Sun King. Alas, we've now missed two in a row.
Unfortunately, our two proxies didn't make it to the Lexington Avenue hotel on Friday night for the annual meeting of stockholders in what is now a Delaware-registered outfit. This made my pre-AGM spruiking on the Murdoch-managed Foxtel through the Sky News Business Channel on Friday afternoon a touch embarrassing as you can see here.
Below are the suggested questions we had for our missing proxies but despite none of them being directly asked, the full audio of the AGM still made for quite interesting listening. For instance, have a listen to crazy former s*x worker Evelyn Davis bang on for 14 minutes.
The best shareholder contribution came from Cliff Kincaid from Accuracy In Media, who extracted a confession from Rupert that Fox News had just fired a notorious supporter of cop killers. Have a listen to Cliff's excellent seven minutes of exchanges and check out his press release trumpeting the sacking.
When will Rupert learn how to run a meeting?
One again, Rupert demonstrated his inability to run a proper shareholder meeting, even ignoring his own rules. At the start of the AGM, Rupert claimed shareholders would be restricted to 2 questions over 1 minute. He also said general questions should be left until the end. The precise words were as follows:
You will have an opportunity to ask questions after all matters have been submitted to stockholders to vote are presented. Please hold your questions until that time. Before asking your questions please state your name and affiliation. As noted in the rules of the meeting, each person is limited to two questions that should be no longer than a minute in length. I now call for questions and answers.
Lo and behold, Evelyn Davis was allowed to rave on across a range of issues before the specific business had been dealt with.
Clifff Kincaird took Rupert to task for being so paranoid in his controls over media access, which this year extended to banning the traditional post-AGM press conference. His key words were as follows:
Cliff: "Mr Chairman, Cliff Kincaid again, Accuracy in Media, I must say these rules and procedures, for a company devoted to the first amendment, are absurd! Prohibiting the taking of photographs and the use of audio and video recording equipment, what is, this the Federal Reserve? To the credit of Fox News, it has gone to court to get information from the Fed on how they are spending our money. Please don't emulate the Fed and try and prohibit the taking of photographs or the use of audio or video recording equipment, in what is really a public meeting, this is a public company. You haven't adhered to this, restricting questions to no longer than one minute, I mean you get more than that on The O'Reilly Factor.
Rupert: All right, just, c'mon (laughs)
Cliff: You oughta re-do these rules and procedures, for a first amendment company, c'mon.
We finally got to Rupert's formal presentation after forty minutes of debate. Have a listen to his fifteen minute address.
Once Rupert finished his speech, the meeting was concluded without any general questions being asked or encouraged.
Meanwhile, watch last year's AGM video where our proxy managed a couple of questions between the crazy rantings of Evelyn Davis and then Rupert brazenly broke his promise to allow for general questions at the end.
With Rupert clearly being unable to run a proper meeting once a year, the argument for an independent News Corp chairman becomes even stronger, especially as we get closer to the all-important succession decision.
The question we'd hoped our proxy would ask Rupert
Have a read of these questions we'd prepared for our two no-show proxies. Just to get a couple of them asked of Rupert would have made for a much more interesting News Corp AGM:
Opening preamble
Chairman last year at the start of the AGM you promised general questions at the end of the meeting but when we got to the end you closed the meeting without asking for general questions. This morning can you please clearly state when you will be asking for general questions and also outline how you would like to handle specific questions that shareholders might have on individual items of business on the agenda.
General questions: Google
Chairman you called aggregators such as Google kleptomaniacs or serial thieves in China last week. How are relations with Google at the moment and is this sort of intemperate language very helpful? Will Google ever come back and do another lucrative Myspace advertising deal if you keep slinging accusations like that around?
Fighting with Obama
We've all sat back in amazement in recent days watching the White House declare that our company is at war with the Obama administration. From a shareholder perspective, is this a sensible move? Are we making so much money out of Fox News that it is worth jeopardising the odium associated with being the biggest critic of a President who is so admired around the world?
Fighting with Gordon Brown
Rupert, were you involved in the decision by The Sun to back the Tories just before Gordon Brown was about to address the big Labor Party conference? Isn't there a risk here such an aggressive move will lead to further regulatory sanctions against our interests in the UK, such as the move by regulators to block our investment in ITV at a cost of hundreds of millions of dollars for News Corp shareholders?
Compared to other media giants
Rupert, two years ago at the AGM you crowed that News Corp had become the most valuable media company in the world. These days Disney is capitalised at $US55 billion and we are struggling along at $US34 billion. Why have we lagged so far behind Disney over the past two years?
Chernin
Are we missing Peter Chernin since he left? Why was his termination payout so generous and what is the current status of his film deal with the company?
Executive pay
Rupert, your pay was cut to a still excessive $US20 million last year, any chance of this falling back to more realistic levels this year and why do you need such a pay packet when you own $3 billion worth of stock?
Rudd
Chairman, you had dinner with Australian prime minister Kevin Rudd the other week. Do you rate him and are you going to back him at next year's federal election? If so, why is our flagship newspaper, The Australian, running such a bitter campaign against the Rudd Government?
Praise and more praise at JB Hi Fi AGM
The AGM season kicked off in earnest last Wednesday when JB Hi Fi, CSL and Ansell all gathered before shareholders in Melbourne.
It would have been possible to take in all three meetings by starting with CSL at 10am, leaving Melbourne Park in a taxi at 11.15am and then getting to Computershare's Abbotsford digs for JB Hi Fi at 11.30am. JB have never had an AGM go longer than 45 minutes so it would have then been easy to then get into town for Ansell at the RACV Club in Bourke St from 2pm.
Alas, with three Manningham Council commitments last Wednesday, plus the regular spot on 774 ABC Melbourne, this was always going to be a stretch so we settled on just attending JB Hi Fi.
Chairman Patrick Elliott joked at the end of the meeting that we had more questions than in the previous six years combined. This just sums up the problem in Australia - AGMs still lack decent debate.
Anyway, below is the edited audio from the JB Hi Fi AGM last Wednesday where the vast majority of my contributions lavished praise on a board which have flogged Woolies and taken a $1 stock through $20 in six years:
Well done in rejecting takeover advances from pokies giant Woolworths
Mr auditor, can we make our conservative balance sheet look any more realistic?
Chairman Patrick Elliott should commit for full three year term
Approving more options for excellent CEO and his successful deputy
Is CEO Richard Uechtritz going to sell any more shares?
Pay the non-executive directors more money for such good performance
Woolworths board tilt falls over
For the second year straight, a nomination for the Woolworths board fell over due to it not being timely. Your silly correspondent assumed it would be the normal 35 business days notice period when it was 45. Not to worry, we'll still be at the AGM in Sydney on November 26 supporting this S249P statement that will be sent to all Woolies shareholders and was put together by Senator Nick Xenophon and anti-pokies campaigner Paul Bendat.
Having failed to get the act together for a Woolies tilt, the decision was made to proceed with early lodgement of nominations for the boards of Ten Network Holdings and National Australia Bank. Both have been accepted, meaning there will be three tilts before the end of the year on the following platforms:
Ten Network Holdings platform as submitted
Mr Mayne is standing for the board on the single issue platform that Ten Network Holdings Ltd (TNHL) offer its 22,000 retail shareholders a share purchase plan at $1.15 a share – the same price paid by institutions in the selective $138 million placement completed in August 2009. TNHL is one of only three ASX150 companies over the past two years to have raised capital selectively from institutions without offering its retail shareholders any opportunity to increase their investment. The other two are Perth-based mining houses Fortescue Metals and Paladin Resources. With CanWest now gone from the TNHL register there is no excuse for the company not to follow the lead of top 50 companies such as Macquarie Group, ANZ, NAB, Qantas, Lend Lease, Westpac, Crown, CSL, Newcrest, Sonic Healthcare, Tabcorp, Lend Lease, Asciano, AMP, Axa and IAG which all offered retail investors a share purchase plan after a selective institutional placement on the same terms. By refusing to do an SPP, the TNHL directors have consciously diluted their retail shareholders as a class to the tune of many millions of dollars. Such treatment, especially in the wake of repeated correspondence on this matter, makes it appropriate for retail investors to now appoint a new director to more vigorously represent and protect their interests.
Fairfax Media platform as appears in the notice of meeting
Stephen offers Fairfax much-needed internet experience as the founder of www.crikey.com.au, Australia's best known independent ezine and a rare example of online journalism being commercially successful. Stephen also understands the radio industry having been a regular ABC commentator in Melbourne and Sydney over a decade, a guest ABC presenter and, more recently, a regular guest on Fairfax's 4BC in Brisbane. After the expiry of his non-compete agreement with Crikey in March 2009, Stephen is free to offer his internet, newspaper, radio and corporate governance experience to the Fairfax Media board. Since November 2008 Stephen has served constructively on Manningham City Council, which has more than $1 billion of assets, 650 staff and $90 million of annual revenues. This has provided valuable experience in a non-executive governance role, including serving on the audit committee. Stephen supports the current Fairfax management team and would be a genuinely independent director, treating issues on their merits irrespective of personalities or individual shareholders.
NAB platform as submitted to company secretary
Mr Mayne is standing for the NAB board as a protest after the board elected to substantially dilute retail shareholders by returning $1.85 billion of the $2.6 billion worth of applications for its share purchase plan in August 2009. By way of contrast, ANZ accepted the full $2.2 billion worth of applications in its recent SPP. Similarly, Macquarie Group also ended up raising more from its retail shareholders through an SPP than from an earlier institutional placement. NAB's retail shareholders as a class have foregone paper profits worth more than $500 million courtesy of the board's decision to be the first major Australian bank to ever scale back an SPP. Despite owning close to 40% of NAB, retail shareholders have only contributed $1 billion of the $6 billion of new equity capital raised over the past year. NAB chairman Michael Chaney is ultimately responsible for this decision and wrote a letter to shareholders on August 31 after the outcry caused by all applicants being savagely scaled back by 71% to just 202 new shares. Mr Chaney is up for election at the AGM and Mr Mayne urges shareholders to send a strong message by voting against the chairman. Mr Chaney's letter justified the scale back, in part, on the grounds that “it is not in shareholders' interest for the company to hold excess capital”. Yet just 18 days later NAB raised $US600 million in Tier 1 hybrid capital notes and a further $US500 million of this capital was raised on September 30. NAB could and should have accepted at least some applications above the arbitrary limit of $750 million for the retail offer. Indeed, the likes of ANZ, QBE Insurance, Crane Group and Adelaide Brighton have all announced caps and then accepted more applications in various SPP offers in 2009. The NAB board consciously diluted their retail shareholders as a class to the tune of several hundred million dollars. Such treatment makes it appropriate for retail investors to now appoint a new director to more vigorously represent and protect their interests.
It will be very interesting to see if the NAB and Ten boards try to censor the platform because both have egregiously shafted retail investors and we've never before seen a board tilt in Australia based solely on a retail rights platform.
Fairfax pulls the no vacancy card
This brief statement was sent by your candidate correspondent to journalists after Fairfax Media released the notice of meeting for its AGM two Thursdays ago, but there has barely been a ripple about the no vacancy rort in the mainstream media.
The peace accord reached after the New Zealand board meeting has most observers believing the three outside candidates do not stand a chance with incoming chairman Roger Corbett having won over the key institutional investors.
It also passed largely unremarked that Ron Walker's progressively expedited departure took another step forward last week when he agree to relinquish the chair on October 30.
This will give Corbett ten days to settle in and present his pitch to the shareholders on November 10. If Ron Walker wanted to do his great mate a favour, he would not attend the AGM at all.
Instead, Ron keeps on claiming to have saved the venerable media outfit when in fact the Fairfax share price has grossly underperformed on his watch and the company was forced to conduct an emergency capital raising at the peak of the financial crisis to pay down its excessive debts after his takeover binge.
News Corp and the push for paid newspaper content
Mark Day had this very interesting column in The Australian's Media section yesterday correctly pointing out that the Murdoch push to charge for newspaper content was far more sophisticated than simply imposing a payment gateway around existing free content.
News Corp is looking at building valuable social media networks around its existing newspaper subscriber base. Pay for the newspaper to be delivered and you'll get plus, plus, plus. It's no different from any other concept of bundled products.
This all sounds very sophisticated and sensible but it doesn't solve the major problem - classified advertising revenue leeching to non-journalistic websites. However, News Ltd was very clever in getting control of www.realestate.com.au and have used all their existing newspaper properties to heavily promote the property sales website whilst enjoying paper gains of almost $500 million on its controlling 60% stake which is worth $620 million as the stock powered through $8 yesterday.
This ties in to the debate about the business records of James Packer and Fairfax Media. There were three fortunes to be made from online classifieds in Australia and Fairfax missed them all. James Packer may have squandered almost $2 billion on offshore casino plays but he cleaned up with Seek and Carsales whilst it was News Ltd that scored the coup with realestate.com.au
That said, Murdoch has clearly blown up billions paying $6 billion for Dow Jones and myspace has also been a $500 million-plus debacle given it still loses money and has also lost momentum with no obvious path to profitability.
Big governance speech to superannuation conference
The Super Ratings "Day of Confrontation" at Docklands last Tuesday was a sell out with more than 300 industry figures turning up for a feisty day of debate before the big awards night.
It was lucky that the Donvale Probus Club cancelled an 11.15am address last Tuesday on concerns my 40 minute Day of Confrontation speech wouldn't finish at the scheduled time of 10.35am. Indeed, the conference started 15 minutes late and Peter Costello didn't sit down until about 10.40am, emulating Paul Keating's effort in going way over time at last year's conference.
This may have been Peter Costello's last big public speech before yesterday's farewell from Federal Parliament, but at least he went to the effort of watching the video of Paul Keating's presentation and even re-running aspects so he could de-bunk the father of super. The expression of regret about the super surcharge being far too complex was also commendable.
Cossie didn't stick around for any of my observations but I opened up with a gentle response to his overblown claims of fiscal achievements and then proceeded to challenge the super industry to get more active.
We don't usually present videos of big speeches, but the audio quality and lighting was good, so you can check it out in full here.
The key points were a challenge to the industry to improve their own governance whilst getting tougher on dud directors of public companies. I revealed certain direct tactics used on BrisConnections chairman Trevor Rowe, former AMP chairman Stan Wallis and Ron Walker at Fairfax and then challenged the industry to do the necessary heavy lifting to get former ABC Learning chairman David Ryan out of the chair at tollroad giant Transurban.
We'll see how long it takes them and also check on progress with Ryan himself at the upcoming Transurban AGM
* Check out the speeches feedback page on our website.
McCrann continues to lead defence of retail investors
This list tracks all the web accessible columns by Australia's major business commentators about the extraordinary rorting and dilution of retail shareholders that has been going on during the record-breaking $100 billion capital raising binge over the past 12 months.
Terry McCrann has clearly been the stand out defender of retail interests and he produced another good column about the weird Ramsay HealthCare scale back on October 6.
Frith makes good point about retail bookbuilds
The Australian's Bryan Frith also stepped into the debate with this column on October 9, focusing on the fact that non-participating retail investors tend to get less compensation from book builds to sell shortfalls because the institutional bidders have usually already got their fill of stock through the earlier institutional offer. The key statistics he presented were as follows:
FKP's issue price was 40c a share. The institutional shortfall cleared at 46c a share, giving the non-subscribing institutions 6c a share, but the retail shortfall cleared at the 40c issue price, leaving nothing for the retail investors. In the case of Transpacific and Prime Media, both the institutional and retail non-subscribers received nothing for their rights, while in ConnectEast the institutions received 3.5c a unit but the retail holders received only 0.5c a unit.
The retail component of Sigma's $297m one-for-three renounceable issue closed yesterday. The issue was at $1.02 a share, and the institutional shortfall went off at $1.07, giving the institutions that did not subscribe a payment of 5c a share. Retail investors make up 55 per cent of Sigma's share register, so the company would have been hoping for a solid response. However, Sigma reported yesterday that retail investors took up only 50.7 million shares, or 32 per cent of the retail component, leaving a shortfall of 109.5 million shares, equivalent to 38 per cent of the entire raising. Not surprisingly, the retail bookbuild went off at the $1.02 issue price, leaving nothing for the holders that did not take up their entitlements.
These points are all correct, but that doesn't mean retail investors shouldn't still be offered some compensation when not participating, especially the foreign shareholders who are ineligible to apply.
I delivered a key note and then participated in a panel discussion at a capital raisings conference in Sydney last Thursday when all of these sorts of issues were discussed in great detail.
For mine, the fairest way to raise capital is through what's called an AREO - Accelerated Renounceable Entitlement Offer.
The trick is to offer every single shareholder the same heavy discount, allow rights trading for those who wish to exit quickly or partially and then also invite everyone (retail and institutional) a chance to bid for the shortfall through a market mechanism. If the bids fall short, then the stock can be given away to those shareholders applying for so-called "overs". And if the discount is big enough, there often won't be any need to pay all those egregious under-writing fees to the highly conflicted gouging advisers such as Macquarie and UBS.
Cornwall's solution for the boats
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Woolies, pokies, shareholder statements and James Strong
We wrote this story for the September 15, 2009 edition of the The Mayne Report:
Help get the S249P statement up for Woolies
I've never before been involved in gathering the required 100 signatures necessary for what's called a S249P statement to be distributed to all shareholders in the notice of meeting ahead of an AGM. Indeed, it has happened less than 20 times in Australia as can be seen from this list.
However, Senator Nick Xenophon is a politician who understands what can be achieved with some shareholder activism and he is sharpening his focus on the Woolies board over the 12,000 pokies run by Australia's biggest retailer.
The Senator's home page includes a big picture of Woolies with the words “fresh food” crossed out and replaced by “pokies”. However, he's gone a step further and is soliciting for the required 100 shareholder signatures to get this proposed 249P statement sent to the company's 300,000-plus shareholders.
Woolies have also agreed to hand over an electronic copy of their share register to Paul Bendat, who is working with Senator Xenophon on this campaign. Check out Paul Bendat's excellent pokieact.org website.
On 29 September Nick Xenophon's office was successful in gathering 100 signed 249P statements. In fact, with more than a week to go, over 230 statements were received and the board has confirmed it is valid.
Is the James Strong career headed for a fall?
For mine, the Woolies S249P exercise will be the most interesting thing to watch during the AGM season, although the expected huge protest vote against the Qantas remuneration report and remuneration committee chair James Strong at the AGM in Perth tomorrow will also generate plenty of headlines.
Strong, of course, is the Woolies chairman who oversaw the huge push into pokies. Now he also seems to think it is just fine to chair a ASX-listed second retailer in Kathmandu. Surely the bloke is already way too busy with his other commitments. Strong clearly hasn't taken the time to closely investigate the Woolies pokies practices like his counterparts at Wesfarmers have done.
And with his credibility dented at Qantas over that huge payout to his old mate Geoff Dixon, maybe it is time Strong also departed the Woolies chair. After all, who else chairs two listed retailers at the same time?
Productivity Commission targets concessional treatment of pokies clubs
The Productivity Commission report on not-for-profits came out last week and we noticed this particularly interesting paragraph:
The other competitive neutrality issue raised is in regard to registered clubs and the considerable benefit they derive from concessional treatment of gaming revenue by their state or territory, benefits not available to hotels and other operators. Clubs do provide valuable community benefits through their support of community activities, but it is unclear that the benefit delivered is sufficient to warrant the concessional gaming tax treatment, given their impact on competitive neutrality. The Commission has not made draft recommendations in these areas which will be subject to more detailed examination as part of the Australian Future Tax System Review.
That's the PC's bold italics not ours.
The detail is in Section 8.4 of the full report for a few pages. There is no detail on how they made the value judgement about 'sufficiency'. The PC clearly did not like the pokies clubs going into other businesses when they had this tax advantage.
As we all get ready for the PC's latest report on pokies, which is being released tomorrow, it is clear Ken Henry's tax review will take in the whole situation of state-based pokies taxes. Maybe that will be the mechanism Kevin Rudd belately uses to attack the pokies which he professed to "hate" when Opposition leader but has done little to combat since moving into The Lodge.
Managing community expectations at Eastern Golf
Save for preparing for the forthcoming fire season, arguably the biggest issue confronting us Manningham councillors at the moment is the future of the 47ha Eastern Golf course located strategically between the Eastern Freeway and the booming redeveloped Westfield Doncaster.
A couple of weeks back the three Koonung ward councillors - mayor Charles Pick, deputy mayor Fred Chua and Ivan Reid - hosted a ward meeting in the council chamber which attracted almost 100 residents, many of whom were keen to vent their spleens.
The planning department did a very good job preparing some informative overhead slides and Paul Molan, our director of Planning and Environment, was an absolute trooper in calmly but firmly explaining where we all stood over the 145 minute meeting.
As a passive observer at the rear of the room, there was clearly a massive disconnection between the demands of the community and the reality of the situation.
At the end of the day, this is arguably Melbourne's best in-fill residential development site located on privately owned land which is already zoned residential. The state Planning Minister Justin Madden has already suggested it be rezoned to allow even more intense development.
Yet in listening to the community, the attention was still very much focused on why the council didn't buy the golf course or demand things such as a 100 metre buffer zone between any newly constructed dwellings and the existing residents living on the boundaries.
Whilst mayor Charles Pick has in the past championed the cause of residents in trying to preserve the site as a golf course, he did well to clearly communicate that council risked having the whole process taken away from it by the state government if we put up unrealistic proposals, such as a demand for huge tracts of public open space to be handed over by the developer.
Charles mentioned our recent dinner with Boroondara council which now laments being too ambitious on the Kew Cottages site which ended up being completely determined by the state government after a big donation from billionaire Sydney developer Lang Walker who at the time was being advised by Graham Richardson.
Walker Corp then sold the site to Mirvac which has proceeded with a $500 million-plus development with little involvement from Boroondara council. Ironically, I'll be catching up with Mirvac chairman James MacKenzie today when he dons his other hat as chairman of Pacific Brands at the AGM.
Unfortunately, this gig kicks off at 10am in Albert Park and then there is a meeting with an ASX50 chairman in town at midday, so I'll be exiting the PacBrands debate before the two hour mark.
Audio breakdown of latest public council meeting
Manningham City Council held a public council meeting on Tuesday, September 29, 2009. Check out the agenda and minutes. Below are links to edited audio of our contributions to the public debate which was also discussed in the last edition.
Speaking in favour of public exhibition of Matthews property re-zoning proposal
Endorsing emissions targets
Closing debate on Wonga Park development proposal which went down 5-4 - rest of debate
Should we ban grog at big festivals?
Tight 5-4 vote to save fireworks at carols by candlelight
Full contentious debate on Kiwanis raffle – Stephen comments
State legislation banning political staffers
Finally on Manningham, all the edited audio highlights from public council meetings since April are available here.
More Cornwall cartoons for The Mayne Report
Former Fairfax and Crikey cartoonist Mark Cornwall has been contributing his satirical commentary to the Mayne Report since March 2009. Here is a collection of his best cartoons and there are also now some amusing animations. Go here to see his animations and below are some new offerings:
Alan Kohler's Mick Gatto apology
The following appeared in Alan Kohler's Saturday morning email update to Eureka Report subscribers on October 10. I remain in the camp of being horrified that a blue-chip public figure like AK would ever consider such an association, let alone sort-of defend it after the all-too-predictable backlash:
The really big highlight of the week, or lowlight depending on your point of view, was the launch of Mick Gatto's memoirs, which I hosted as chairman of Melbourne University Publishing. I began my opening speech as follows: “A lot of people ask us why MUP is publishing a person like Mick Gatto. The answer is that just because we're a university press doesn't mean we only publish boring books that no one buys.”
But while I was, and am, unapologetic about publishing Gatto's memoirs because I think it will make MUP a lot of money, many of my family and friends – in which I include you – are not happy about me associating with gangsters. My wife is not happy. My best pal (a prominent judge) is far from amused. Some subscribers have written to us expressing their disgust. My kids thought it was it was a hoot, of course. And some of my friends actually came to the launch to soak up the atmosphere.
Anyway, if seeing me launch Mick Gatto's memoirs upset you, I sincerely apologise. I can assure you it does not mean Eureka Report has any less integrity or that I am going soft on crime. It was just a book launch.
It has been equally surprising that this sort of debate hasn't really played out in the media. If Alan is apologising to his Eureka Report subscribers, what about the 1 million-plus Australians who watch him deliver the finance report on ABC television each evening? After all, it's hard to imagine the BBC's finance guru launching a prominent gangster book.
Most recent Mayne Report editons
Sign up here to receive the weekly Mayne Report member editions for free and you can also see an archive of all editions from 2008 and 2007. If you've only just got on board or missed some recent missives, try these for size:
October
ASX AGM, Fairfax, capital raisings, MAP, Bulleen Boomers, Manningham, classic Cornwall, AGM schedule and much more
October 5, 2009
September - 4 editions
Compass, MAP, dodgy SPPs, exec pay, Mirrabooka AGM, Manningham, capital raisings, Rich List and much more
September 26, 2009
Fairfax, RACV elections, MAP, capital raisings, Manningham, Wallis, hostile EGMs, video, AGM diary, rich list and much more
September 22, 2009
Bad Bendigo, Mark Day, Manningham, pokies, NAB, Asciano, Rich List, Paladin, hostile EGMs and much more
September 15, 2009
Elders rip-off, NAB excuses, Woolies grog push, Virgin scale back, Australand windfall, McCrann, Walkleys, activism, Macek, AMP and much more
September 8, 2009
From the archive: Rupert, Babcock, Brisconnections and ABC Learing
We're introducing a new regular feature called "From the Archive" which highlights some favourite encounters from over the years. Part of the theme in this edition is picking trouble early:
Final Mayne Report for 2007 - time to avoid ABC Learning
Monday, December 24, 2007, 3:52pm
Brisconnections tanks with conflicts and spin everywhere
July 31, 2008
News Corp AGM edition
6 stories - Saturday, 22 October, 2005
Great debate at the Babcock & Brown AGM
May 30, 2008
The latest capital raising plays
Check out this complete chronological list of all capital raising plays in 2009 and at the bottom is a list of the 20 or so upcoming offers.
There's also this version ranking the top 60-plus plays since January. For the latest shuffles in our ridiculously large tiny share portfolio, check out all trades in 2009 plus the full portfolio of more than 700 holdings. The October capital raising gains so far have amounted to $7471, which breaks down as follows:
October 16
Industrea: $15,000 into SPP at 40.92c and then exited at 44.5c for a profit of $1285.
Isoft: $15,000 into SPP at 77c and then exited at 86c for profit of $1755.
October 12
Healthscope: $15,000 into SPP at $4.19. Exited at $4.59 for a profit of $1431.
October 9
Folkestone: $7,200 into 2-for-1 entitlement offer at 15c. Got the lot and exited at 15.5c to make profit of $240.
October 5
Clarius Group: $20,000 into 1-for-3.5 entitlement offer at 64c but scaled back to just 10 new shares as formula was 2.3 times entitlement.
October 7:
Cougar Energy: exited two scaled back $15,000 SPPs at 8.25c for 9.9c to make a profit of $2600.
Ramsay Healthcare: exited three heavily scaled back $15,000 SPP offers at $9.835 for average $10.52 to make profit of $200.
October 8
Gunns: $18,000 into entitlement offer at 90c. Scaled back to virtually nothing.
Offers we're currently committed to
This list tracks all applications we've made in current capital raisings offers which will peak this Friday when Myer, Boart Longyear and Brickworks all close:
Amadeus Energy: $5000 into SPP at 26c. Closed October 16 and trades October 23.
AWB: $25,200 so far into two 1-for-1 entitlement offers at $1 with ability to apply for extra. Closes October 21.
Bass Strait Oil: $10,000 into 2-for-3 entitlement offer at 3c with extras. Closes October 20 and trades October 29.
Boart Longyear: $15,200 so far into two $15,000 SPP at 27c which closes October 23 and trades November 5.
Brickworks: $9994.40 so far into $15,000 SPP at $12.40 which closes October 23 and trades November 3.
CMA Corp: $15,000 into SPP at 10c which closed October 8 and trades October 20. No scale back.
Elders: $30,000 so far into two $20,000 SPP entitlements at 15c. Closes on October 23 and trades November 3.
FEA: $10,000 into 1-for-1 offer at 7.5c with no scale back of extras. Closed October 14, trades October 23.
Myer: $10,500 so far into flying blind offer through being the owner of 1 note. Closes on October 23 and trades November 2.
Real Estate Capital Partners: $15,000 into SPP at 15c or 7.5% discount. 15% scale back and trades on October 21.
Redflex Holdings: $10,000 into 1-for-12 entitlement offer at $2.04 but scaled back to virtually nothing. Trades October 20.
Watpac: $30,000 into three $15,000 SPPs at $1.25 but scaled back to 2110 shares. Trades October 23.
Total live applications: $145,932
Refunds outstanding
Watpac: $27,363
Redflex: $9800
RCU: $2100
Total funds committed: $185,395 (includes more than $20,000 borrowed from third parties)
AGM season diary is up and running
There was a brief appearnce on Lateline Business on October 5 discussing the beginning of AGM season.
More importantly, we've put together this comprehensive diary of what lies ahead. Check it out and send in any corrections or additions to stephen@maynereport.com.
After all the debate about James Packer caused by Paul Barry, the Crown AGM in Melbourne on October 28 will be a corker. I've been encouraging Barry to come to the meeting and ask some questions but without any luck thus far.
Mayne Report video blog
We have been put together playlists of videos covering similar topics and additionally, collections of videos from television appearances. Check out these special edition videos here.
Watch this excerpt on commentary about James Packer that appeared on 4 Corners last week:
Press Room and podcasts
Below are the latest contributions to the press room:
Radio
774 ABC Melbourne - with Bruce Guthrie discussing Fairfax, AGM season and JB Hi Fi on October 14.
774 ABC Melbourne - with Lindy Burns discussing Costello, banks and the world of finance on October 7.
Sky Business View - watch these videos where we discuss CBA's ASIC fine, a cheeky grab about Fairfax, the JB Hi Fi AGM and the 2009 News Corp AGM, on Friday, October 16
The Mayne Report Rich List
Since we began compiling the Mayne Report Rich List documenting Australians currently or previously worth more then $10 million, it has grown in numbers and popularity such that no other feature on our website can match it for traffic. Here are a couple of new entries:
Dennis and Graciela Mcgillicuddy: large individual shareholders of Industrea with around 15.2 million shares or 8%.
Jeffrey and Karen Schiller: joint shareholders at Medusa Mining with about 2%. Add to this joint holdings in the Independance Group of just under 2 million shares or 1.6%, which pushes their wealth above our $10 million cut-off.
Anthony Wooles: is the founder of maintenance company Pearl Street. He holds around 38 million shares in the company which pushes his wealth north of $20 million.
All the recent share trades
Check out all the trades so far this year and here's the world's biggest small portfolio which on October 9 stood at 721 holdings worth $56,622. The overall paper loss was $9,062 and average holding just $81. Anyway, here are most of the recent trades:
October 16
Praemium Investors: bought 2,565 at 19.5c
October 14
Marmota Energy: bought 5,423 at 18.7c
Carsales.com: sold 122 at $3.89
Chemgenex sold 705 at 73.5c
Extract Resources: sold 46 at $10.03
Lynas Corp: sold 731 at 58c
Macarthur Cook: sold 1,779 at 25c
Milton corp: sold 23 at $17.85
Molopo: sold 425 at $1.19
Prime Media Group: sold 760 at 76.5c
Rock: sold 250 at $1.90
Traffic Technologies: sold 8,611 at 6c
Transurban: bought 116 at $4.32
Qantas: sold 235 at $2.96
October 13
Pan Pacific Petrol: bought 1,087 at 46c
October 12
Capral: bought 14,543 at 7c
Cash Converters: bought 878 at 57c
Healthscope: sold 3,594 at $4.59
Little World Beverages: bought 256 at $1.96
October 9
Folkestone: sold 48,000 at 15.5c
October 8
Adelaide Managed Unit: bought 385 at $1.30
October 7
Caspian Oil and Gas: bought 52,632 at 1.9c
Cougar Energy: sold 158,182 at 9.9c
Ramsay Healthcare: sold 358 at $10.54
October 6
Babcock&Brown Power: bought 6,757 at 7.4c
Campbell Brothers: bought 18 at $28
Willmot Forrest: bought 1,852 at 50c
October 5
Molopo Australia: bought 435 at $1.15
Mayne Report RSS Feeds
The Mayne Report now has RSS feeds for you. We have bundled our best articles into a simple and easy delivery for you. Add an RSS feed to your personal reader, iGoogle, MyYahoo, or blog. It's quick and easy to do and means you're always up to date with the latest Mayne Report activity.
Sign up for Mayne Report Tweets
We have only been twittering for a few months, but now have almost 900 followers and are regularly dropping out the latest developments from AGMs, capital raising plays and even Manningham Council. Sign up below to get the latest updates from all our activity and check out some of the latest tweets :
10:43am Oct 12th
Exited Healthscope share purchase plan for gain of $1550. Getting ready for latest ABC Learning creditors committee meeting at noon.
9:02pm Oct 7th
Fairfax notice of AGM out. 4 chasing 2 spots due to no vacancy rort: http://imagesignal.comsec.c...
9:52pm Oct 6th
regular chat on 774 ABC Melbourne discussing the world of finance http://bit.ly/BS5pD
2:22pm Oct 6th
Exited Cougar and Ramsay SPPs for gain of $3100. See full list of plays: http://bit.ly/QZieV
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.