Crikey vs Macquarie Infrastructure Group in 2003

It might be time for unitholders of Maquarie Infrastructure Group to rise up and overthrow the costly and incestuous "management agreement" under which the world's biggest tollroad operator hands over some $200 million a year to its original conceiver and minutely minority shareholder, the rapacious Macquarie Bank.

At today's MIG AGM, the company's chairman, smooth-talking lawyer Mark Johnson, refused point blank to even consider altering the extraordinarily lucrative deal for MacBank. Not surprising, really, when you consider he's also a top Macquarie executive.

This was one of a series of issues Crikey tackled when we got to the microphone to question the chairman. In response, Johnson completely rejected the suggestion there was even a hint of a conflict of interest, effectively arguing that the bank only profits when MIG unitholders do.

However the conflict of interest issue cannot be avoided so easily. MIG's triple stapled security structure is completely administered through a Macquarie Bank owned entity.

After several changes, the Board of that entity only recently satisfied the ASX Corporate Governance Guideline that a majority of directors be independent – in this case, independent of MacBank. Crikey questioned the 4-3 independence split and raised question marks over the independence of David Mortimer, given his record of dealings with MacBank and the fact he once occupied an office on the bank's premises.

Johnson strongly defended Mortimer and corrected the record by explaining that although he had previously had "some accommodation" at MacBank, Mortimer had not had an office there for three years. Crikey accepted the correction of the record. But our call for Johnson to move to a clearer, unquestionable and strong majority of independent directors was dismissed outright.

This initially cordial exchange prompted an extraordinary scene at the lunch break of the meeting, when a visibly livid David Mortimer approached the Crikey team with several angry remonstrations. With pointed fingers and a hostile tone, Mortimer suggested the public forum question was a "personal attack", and that the last time something like this occurred, he sued Mark Westfield from The Australian.

The clearly implied threat and iron-fisted approach fairly stunned the Crikey team, one of whom thought it appropriate to suggest Mortimer was an "arrogant ****er". (Ed: Oh dear, that would be our feisty AGM heckler, Hugo Kelly) A rigorous 10-minute discussion ensued during which Mad Dog Mortimer gradually calmed down, retracted his threat and made his main point that he wanted to correct a fact for the record (ie that he had not had an office at MacBank for three years).

Considering that Crikey had made a point during the questioning of applauding Mortimer's "unquestioned expertise and experience", and was merely keen to clarify the issue of independence, Mortimer's knee-jerk defensiveness at this "personal insult" was a fairly dramatic overreaction.

Chairman Johnson had taken a far more conciliatory approach in his handling of the meeting. In response to Crikey's suggestions that MIG might want to consider an alternative structure to the management agreement (such as internaliszing it), he unequivocally stated they Board had not and would not offer any such consideration, but if aggrieved unitholders wanted to do something about it, "they are free to put that proposal".

Maybe it's time they did, especially after Johnson memorably described the deal as a "fair bargain". This is the most lucrative management agreement in the country. We pointed out that it didn't take a genius to manage a portfolio of operating tollroads with an average 50+ year concession and guaranteed price rises.

Why do MIG shareholders need to pay some outside body more than $200 million a year to do this? Some broker reports even suggest the MacBank's management deal is worth over $800m, so the fact MIG will not even consider a potentially more valuable agreement for unitholders smacks of high-handed arrogance.

If that's a "fair bargain" we want to buy real estate off Mark Johnson. About the only member of the business community with the same idea of fair value might be David Tweed. Crikey's articulation of these points received strong applause from the 250-odd people assembled in the Shangri La Hotel in Sydney.

There were few other searching questions from unitholders and regrettably, the Australian Shareholders Association put in another dismal performance. It is not often an ASA representative is heckled by the crowd to "get on with it" and "make your point", but unitholders started walking out when the ASA operative got long-winded.

Perhaps unitholders had already been won over with an informative and much appreciated business over view from MIG's impressive new Canadian CEO Stephen Allen. "We love trucks!" he told the meeting at one point, after being questioned about whether truckies were taking to the company's UK Midland Expressway.

In terms of formal proceedings, Johnson went to the grab-bag of resolutions – which included impenetrably-worded amendments to the company's constitution - and called a formal vote. He adjourned the meeting for 40 minutes for the votes to be counted, effectively taking the heat out of the meeting – but not out of Mad Dog Mortimer.

By the time Mortimer calmed down, and Johnson re-convened the meeting, some 14 unitholders remained. They were outnumbered by the board and MIG staff, and Johnson announced to the virtually empty hall that all resolutions had been passed.

Only one question remained: are there any institutional shareholders keen to take up Johnson's challenge? The shareholders we spoke to were angry about the fee rip-off, but phlegmatic – they had hedged their bets by buying MacBank shares!

But the major instos who hold MIG shares are in an interesting position. They are funds management and investment bank competitors of MacBank who could really rain on the Millionaire Factory's fee-gouging parade. So come on Westpac, JP Morgan, Citicorp, HSBC, Colonial, Perpetual, MLC, AMP – you own over a third of the company. Why don't you get together and do it. All it will take is a resolution from holders of five per cent of the company's capital to get up an EGM and sort out this burning conflict.

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