Executive Summary: September 22, 2009
By Scott Rochfort | smh.com.au | 22 September
All aboard.. Geoff Dixon.
CBD
Dixon given free ride for missing the boat
The Flying Marsupial for once showed some compassion for its former chief executive Geoff Dixon, who was hit by some nasty changes in the tax treatment of his superannuation.
The airline's annual report shows Dicko, 69, was paid $3 million "in partial compensation" for the retrospective changes in tax law that impacted the $7.66 million that was tipped into his super account when he renewed his contract in August 2006.
The contract, which actually did not have to be renewed until July 2007, also happened to be struck three months before Qantas received a takeover bid from Airline Partners Australia (APA). Fancy that.
And this was also not the first time Dicko was hard done by on the pay front. When the Texas Pacific and Macquarie-led private equity bid for Qantas fell over in May 2007, Dicko missed out on an $8 million bonanza he would have got on the sale of his shares (awarded to him at the previous annual meeting) and the termination of the contract he renewed only nine months earlier.
The collapse of the private equity offer also meant Dicko missed out on the package on offer from APA.
Under the contract, Dicko stood to earn up to $90 million in bonuses and wages over five years.
Mind you, in retrospect it was probably a good thing for Dicko's bank balance and the Australian public that the debt-laden APA offer never succeeded.
An APA-owned Qantas probably would not have been around long enough to pay Dicko the $10.7 million he reaped in his final nine months at the airline.
Striking gold
Murchison Metals took out yesterday's award for the best boardroom wage breakout.
The group's executive chairman, Paul Kopejtka, saw his base pay rise 42 per cent to $501,400 last financial year.
At this rate, if Kopejtka was a country he would be the third most inflationary behind Ethiopia and Zimbabwe.
Murchison's managing director, Trevor Matthews, leapt ahead of Ethiopia with a 53 per cent rise in his base pay to $545,000.
Norman wisdom
A second Harvey Norman director in a week has picked an opportune time to sell a chunk of shares in the retailer.
Chief operating officer John Slack-Smith last Thursday sold 1.4 million of his 1.66 million shares for $6 million, the same day Harvey Norman shares hit a 19-month high.
Maybe he was just cashing in for a present for chairman Gerry Harvey, who turned 7o the following day.
Several days earlier, Harvey Norman's David Ackery sold 350,000 shares for $1.5 million.
Rock and roll
The monolith of Rockhampton's corporate sector, The Rock Building Society, has been given another chance to live up to its name.
For a third year running a bunch of out-of-towners has had the nerve to call for board changes at the Central Queensland financial powerhouse, which reported a $4.3 million profit last year.
The Airlie Beach-domiciled Queensland Trustees and Investment Limited (QTI) wrote to shareholders of The Rock last week expressing "grave concerns" about the group's financial performance.
QTI is trying to rally enough support to have its managing director, Michael Hackett, and former Rock managing director Kerry Daly installed on the board.
They are also pushing for the ousting of The Rock's Rockhampton-born chairman and director of 34 years, John Maxwell, and another Rockhampton-born director, Bradford Beasley.
QTI in its letter to shareholders notes the "lack of capital management planning" at The Rock. It notes that The Rock achieved an average 17.7 per cent annual return on equity under Daly's eight years of stewardship.
The letter does not mention that Daly, after leaving The Rock, was an executive director at the Lehman Brothers-owned toxic debt spruiker Grange Securities from January 2001 to July 2008.
QTI's move comes a year after The Rock repelled attempts by the Brisbane (aka Big Smoke) financial concern and 3 per cent shareholder, FirstMac, to get a seat on the board.
QTI bought its 3.3 per cent stake off another Brisbane shareholder who attempted to get a board seat in 2007.
Service Charge
Boral's managing director, Rod Pearse, can look forward to a rowdy send-off when he rocks up to his last annual meeting next month.
A year after a majority of Boral shareholders voted against the $3.9 million in bonuses and benefits pocketed by Pearse despite the company's sinking share price, the Boral boss pocketed even more in the financial year just past.
The company disclosed in its annual report Pearse's total remuneration went from $6.6 million to $11.5 million for last financial year.
This was the year Boral reported a 42 per cent slide in profits.
Despite the outgoing managing director not being paid any short-term bonus for this year, his pay packet was increased by a $4 million "end of service" payment and his "equity benefits" surging to $4.45 million.
His base pay was also another inflation buster, rising 9.2 per cent to $2.96 million. Outgoing chairman Ken Moss also did well, with his base fees rising 16 per cent to $316,600, well above Pakistan's inflation rate.
In the group's sustainability report, Pearse notes "the need to reduce costs". Obviously it is not a need that relates to the entire organisation.
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Insider
Edited by Jamie Freed
Deadline nears for Fairfax board
The clock is ticking for the board of Fairfax Media, the Herald's publisher, to nut out a compromise in the spat over the chairman position before the battle turns even uglier.
Although it could potentially push back the date of the annual meeting as far as November 30, Fairfax has booked the Four Seasons Hotel in Sydney for its annual meeting on November 10 and appears to have no intention of making any last-minute changes.
Therefore, its notice of meeting, which has been set to include resolutions on the re-election of the chairman, Ron Walker, and the deputy chairman, Roger Corbett, will head to the printers in a fortnight to ensure it can be posted to shareholders by October 8.
Nominations for directors close tonight. As of last night, there were no apparent surprise nominations by John B. Fairfax's Marinya Media.
Corbett is expected to return from overseas on Sunday morning, so it is possible that could serve as the catalyst to a deal.
One option that has been floated is the possibility that Walker would agree to retire at the meeting so long as Corbett has been anointed as his successor, but it remains to be seen if that is acceptable to Marinya.
Both sides – the Fairfax independent directors and Marinya – claim to be confident of having the numbers to succeed in a vote at the annual meeting.
In a proxy battle, one deciding factor for institutional investors could be the view of proxy advisers. Those views will not be published until after the notice of meeting is distributed, but the early suggestions are that the Walker camp might come out the winner in those reports, which tend to focus on corporate governance.
Marinya owns just 10 per cent of Fairfax, but it has appointed two directors and an alternate and has close ties to the managing director, Brian McCarthy.
If Marinya effectively appointed the chairman as well, this could raise concerns that its level of control is disproportionate.
Some investors have raised concerns about Walker's plans to seek re-election and then retire within the year rather than retiring immediately.
But proxy advisers have previously supported such actions – so long as a suitable explanation accompanies the notice of meeting – with recent examples including IAG and Boral.
Mind the Gap
The initial reaction from fund managers to Global Airports's surprise management proposal for Macquarie Airports went something along these lines: "Nice try guys, but it's a long shot."
Before Macquarie Group last night sweetened the indemnity from change-of-control costs associated with its offer to $345 million from $100 million, most investors thought the GAP effort would at most add leverage to extract a better deal from Macquarie.
It now appears those fund managers were spot on, and it remains to be seen whether they and GAP will be emboldened to push further.
In its initial reaction to Macquarie's sweetened offer last night, the GAP camp quipped that Macquarie should have left the indemnity in its proposal steady at $100 million but reduced the fee to the same rate rather than the reverse.
GAP has already been rejected twice by MAp and has not walked away, so it is fair to assume it could have a few tricks up its sleeve.
The GAP proposal had increased pressure on MAp to release the detail of change of control clauses that could trigger the need to refinance debt held within the Brussels and Copenhagen airports.
MAp continues to insist that the $4 billion of debt agreements involving 40 banks are confidential, but says the independent directors and their legal advisers are confident that cutting management ties with Macquarie will not trigger immediate refinancings.
If that proves to be the case, it won't matter one bit that Macquarie has increased the indemnity.
Meanwhile, there are expectations that a drawn-out battle over management rights at MAp will have ramifications for investors in Macquarie Infrastructure Group.
MIG's independent directors are working out the best way to split from Macquarie but many think they are unlikely to finalise a deal until a precedent is set by MAp.
Making hay
There have been plenty of capital raisings in the agribusiness sector of late, and with a series of debt refinancings looming, there is speculation that AWB could be among those next in line.
AWB has been focused on selling its half-stake in the Hi-Fert joint venture with Elders – worth about $69 million – and a rural loan book that would free up another $150 million of cash.
AWB has been in talks with banks about refinancing $1.3 billion of debt in various tranches and types that is due by December, but it is worth noting that most peers in similar situations have been "encouraged" to raise equity as well.
AWB has gearing of 46 per cent and a credit rating of BBB – on negative watch – the lowest possible investment grade rating. The Hi-Fert sale process, run by KPMG, is said to be nearing conclusion.
The Landmark Financial Services business has about $500 million of debt that needs to be refinanced by November which could be a key element of sales talks. ANZ and Rabobank could be among the more likely buyers.
AWB's managing director, Gordon Davis, yesterday told a BBY conference that the refinancing of a $400 million corporate facility due in October was "well advanced". An AWB spokesman said an equity raising could not be ruled "in or out" as part of its refinancing.
jfreed@smh.com.au
First published by Smh.com.au on September 22 2009
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