6 questions lodged at 2024 Elders hybrid AGM

Q1. The recent 1-for-5.05 non-renounceable capital raising at $8.52 raised $246m but was badly structured and has been a shocker for investors. The $143m accelerated component was well supported by 90% of existing holders, in part because there was no shortfall bookbuild to compensate non-participants. That's what you call a 48 hour gun to the head! The ability for retail shareholders to apply for overs was also banned, which guaranteed a big shortfall. The 22,000 retail shareholders only applied for $9 million of the $103m worth of shares they were offered, leaving a chunky $94 million shortfall with under-writer Macquarie and its unknown sub-under-writers. The stock is today at $7.02 so shareholders who participated in the capital raising are $44 million under water. Why did we take Macquarie's advice to structure this raising so badly?

Answer: The chair Ian Wilton said it was the same capital raising structure they'd used with a previous acquisition and made a curious claim about analyst valuation models when explaining the falling share price. He also pointed to the stock going ex an 18c dividend. Watch video of exchange via Twitter, plus these additional comments at the end.

Q2. Thank you for disclosing the proxies early with the formal addresses to the ASX which revealed a 67% second rem strike. Your shareholders are clearly revolting. Which of the proxy advisers recommended against the rem report and what reasons did they give for doing so. There was also an unusually high 13.5% vote in favour of a board skill. Do we know which shareholders want to spill the entire board and why? Did any proxy advisers support voting for the board spill resolution?

Answer: The chair took issue with the framing of revolting shareholders and explained that the board's decision to pay out the CEO's entitlements in full triggered all the proxy advisers to recommend against the rem report and one even went further, backing in the board spill.

Q3. When we announced the Delta acquisition, The AFR's Chanticleer columnist wrote the following: "Just when you think Australia's consolidated industries have just about killed off domestic M&A, you get a deal like 185-year-old agricultural services bigwig Elders buying privately owned Delta Agribusiness. From a high level, it's a $475 million deal you would not expect to pass muster with a resurgent ACCC. It involves the clear No.2 player buying what was marketed to potential buyers as the No.3 player, with synergies equivalent to about one-quarter of the target's annual earnings." Our share price has since tanked, suggesting that we have overpaid to take out a competitor? What are the odds of the ACCC blocking this deal?

Answer: The chair claimed there are lots of independents, implying that the ACCC would wave the deal though. He didn't deal with the overpaying issue. Watch video of exchange via Twitter.

Q4. Could new director Damien Frawley and the chair comment on the recruitment process that led to his appointment to the board. Was a head hunter involved, did the full board interview Damian and did they interview any other candidates? Did Damian know any of our directors before engaging with the recruitment process?

Answer: The chair said they used a headhunter and Damien commented that he'd met the CEO once before engaging with the recruitment process.

Q5. There was a 12.45% protest vote against Glenn Davis on the proxies but no protest against fellow new director Damien Frawley. Was this caused by a proxy adviser and what concerns did they raise?

Answer: The chair Ian Wilton said one proxy adviser recommended against on over-boarding concerns but Glenn had committed to reduce his workload. Watch video of exchange via Twitter, plus this campaign speech from Glenn Davis.

Q6. Thanks to the excellent early proxy voting disclosure, we know that 211 shareholders voted for this board spill and 212 voted against. Sadly, that's a tiny proportion of our 22,000 shareholders. What sort of campaign did we run this year to get out the vote and will we try harder next year because 423 directed proxy votes is very low indeed.

Answer: The chair agreed it was low and said they would look to do better next year. Watch video of exchange via Twitter.

Copyright © 2024 The Mayne Report. All rights reserved

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