Executive Summary: October 28, 2009
By Scott Rochfort | smh.com.au | 28 October
John Ellice-Flint ... heading off on a marine adventure. Cartoon: John Shakespeare
CBD
A red hue creeps across the quarry
The Chinese grip on Australia now appears to extend well beyond the mining sector and Chairman Kevin Rudd's linguistic abilities.
The president of the NSW branch of the Australia China Business Council, Jim Harrowell, made a Freudian slip yesterday morning when he referred to the People's Republic of Australia.
That got some secret service-looking types talking into their cufflinks. It happened while he was introducing China's ambassador to Australia, Zhang Junsai at the Hong Kong-Guangdong Business Conference, marking 30 years of sister-state relations with NSW. ("Guang" means "vast" in Cantonese)
The Premier, Nathan Rees, also tried his hand at Mandarin, kicking off his speech with "zhau sung hau" (good morning).
Other Labor heavyweights/lightweights, sons of former PMs, Macquarie Street staff and lobbyists at the event included Carl Scully, Bob Carr, Morris Iemma, Nick Whitlam and Ian MacDonald.
The keynote speaker was the governor of Guangdong, Huang Huahua. "The spring of Australia is in the air in October and everything is thriving with energy," reasoned the former Chinese coalmining company employee in his speech, delivered in Chinese.
Boss's unite!
Elsewhere, Kevin Rudd decided to give his speech in English. Rudd was the "guest of honour" and keynote speaker at the annual dinner of the Chief Executive Officer Union of Australia (aka Business Council of Australia).
In light of the recent hoo-ha (Mandarin for "bid deal") over executive pay packets, it is believed the union laid off making any outrageous claims to the Prime Minister last night. It is understood some chief executives are willing to cap their base pay rises at 50 per cent in the coming year.
The union reasoned in its submission to the Productivity Commission's inquiry into executive pay: "It is not just the quantum, but also structure of CEO remuneration and the nature of performance benchmarks that filters down the ranks.
In other words, restrictions on executive remuneration will typically have significant flow-on effects."
The more pay for executives, the bigger the scraps for the underlings. "Anecdotally, many CEOs, particularly those with overseas experience, remark on the degree of public examination of their performance and remuneration in Australia compared with elsewhere," the union said in its submission.
Yesterday the union appointed the former Perpetual boss Graham Bradley as its president. Aside from serving on several company boards, including Boart Longyear and SingTel, Bradley recently provided some character references for two former James Hardie directors.
The union's board includes the DuPont operative Hutch Ranck, the head Commonwealth Banker Sir Ralph Norris, BP Australasia president Gerald Hueston, Mallesons Stephen Jaques bigwig Rob Milliner, and Corrs Chambers Westgarth's John Denton. Boral's outgoing chief executive, Rod "Mr $11.5 million a year" Pearse, resigned from the board yesterday.
Leaping leo
Merrill Lynch's poaching efforts have now extended to former AFL stars.
The US taxpayer-funded investment bank has lured the former Sydney Swan Leo Barry from the US taxpayer-funded Citigroup.
The Swans sponsor had spent two years training Barry in preparation for his post-AFL career.
Off to sea
The former Santos chief executive John Ellice-Flint has finally buckled. Since "retiring" from the gas and oil concern with a $16.8 million golden parachute early last year, Ellice-Flint has been fighting off job offers that have been coming thick and fast.
But yesterday he finally relented when he was named as the new non-executive chairman of Adelaide's Clean Seas Tuna.
"He has an extraordinary body of commercial experience behind him and a real passion for our business and enthusiasm for his new role," said Clean Seas Tuna's outgoing chairman and founder, Hagen "The Kaiser" Stehr, in a statement.
Not enough
The copper explorer Cudeco seems to think the surge in executive chairman Wayne McCrae's pay packet and in the value of his shareholding have not provided a big enough incentive.
The company has lobbed a resolution for shareholders to grant McCrae and his fellow executive director, Peter Hutchison, 2.5 million options each.
The options will expire in 2012 and will be priced at $6.50, which is only slightly below the $6.59 high Cudeco shares hit last month.
"The issue enables the company to provide its directors with reward for services provided and an incentive for future services they will provide to the company to further progress the company in a cost-effective manner, as opposed to other forms of remuneration, such as cash," says Cudeco's notice of meeting.
Shareholders are also being asked to grant the company's three non-executive directors, Bill Cash, Paul Keran and David Taylor, 100,000 options each.
The 5.3 million options represent about 4 per cent of the company's share base. In the past year McCrae has already seen the value of his stake increase more than fivefold, to about $70 million.
Last financial year his pay packet went up 11 per cent to $413,050. He also saw the rent he collected from Cudeco – for its headquarters on the Gold Coast and operational base in the town of Cloncurry – rise from $123,791 to $167,781.
Not a bad yield. McCrae's private company purchased the Gold Coast property he leases to Cudeco for $120,000 in 1998.
He purchased the Cloncurry property for $150,000 in 2002.
Caring men
The recently bailed-out and male-membered Sydney Tattersalls Club has again attempted to show its sensitive side by raising $3500 at a breakfast for the McGrath Foundation and National Breast Cancer Foundation.
The breakfast was hosted by the surfing champ Layne Beachley and cricketing wife Tracy Bevan. It quickly cleared out after several Tatts members decided to do a dance routine in pink speedos.
Boat sunk
The Wesfarmers-backed Nautilis Marine Boat Insurance appears to be trying to find a new type of clientele.
Nautilis has defended itself against a complaint about an ad featuring "an image of what is suggested to be a boat full of illegal immigrants, crammed with passengers, low to the waterline and in imminent danger of capsizing". Photos of people from the insurer were included in the ad, which was accompanied by the text:
"There's boat people ... and there's boat people." In its defence Nautilis argued the people on the boat were "well dressed, obviously commuting, including one with a bicycle in hand and others with shopping bags".
The Advertising Standards Board upheld the complaint. Got a tip? Use our online tips box or email srochfort@smh.com.au
Insider
Edited by Jamie Freed
ING ponders a sale of local operations
There is no shortage of activity in the global, and Australian, asset stable of ING Groep.
The Dutch company unveiled a €7.5 billion ($12.15 billion) capital raising on Monday night, combined with plans to split its banking and insurance operations within four years.
The insurance operations will probably be sold to one or multiple buyers, or they could be floated, but in any case the talk is that the bulk of the split will be completed well before 2013.
Locally, ING Investment Management and ING Real Estate Australia both fall under the insurance umbrella, while the much larger ING Direct is part of the banking business.
Earlier this year ING tested the market on the sale of ING Direct Australia and found no takers at the right price.
Now that it has raised capital, there is believed to be no urgency to sell the unit unless a great offer is lodged. But the fate of ING Investment Management, which manages more than $32 billion locally, and ING Real Estate Australia is up in the air.
ANZ, which recently paid $1.8 billion to buy the 51 per cent of the ING-ANZ wealth management joint venture it did not already own, has made clear it is not interested in entering the investment management business.
It plans to use ING Investment Management as its preferred provider of asset management services in the medium term.
Globally, ING Investment Management has spent the past eight months grouping its operations together, which may indicate some preference for a package sale.
But if an individual sale of the local unit is considered, NAB (via MLC) and AMP could find it a nice bolt-on to their existing investment management businesses.
Seeking a raise
Elsewhere in the ING stable, its real estate arm was unable to tip any funds into ING Industrial Fund's $700 million capital raising yesterday because the timing of its announcement of a global capital raising and split meant it could not gain necessary approvals from the European Commission in time.
Therefore, its 18.4 per cent stake in IIF will be diluted to less than half of its present level. However, the European approval issue should be resolved within two to three weeks.
That may be enough time to allow ING to avoid similar dilution to its stakes in ING Real Estate Entertainment Fund and ING Real Estate Community Living, which are said to be likely to undertake capital raisings once they complete strategic reviews.
Both have high gearing levels compared with their peers. ING's real estate arm is said to be keen to maintain its stakes in the satellites where possible to ensure the overall division can be sold at the best price as part of the global split between insurance and banking.
The IIF raising was underwritten by JPMorgan, Deutsche Bank and Goldman Sachs JBWere, but the financial advice came from Moelis and Company.
It was Moelis's second deal since it set up shop in Sydney a few months ago, the first being the arrangement of Galileo Japan Trust's recent $141 million of mezzanine financing. Moelis, which also operates in the US and London, has big ambitions for Australia.
Locally, Moelis's current expertise is in restructuring and property, but it is expected to hire more bankers with experience in other sectors early next year and eventually wants to broaden into the brokerage arena as well.
That would differentiate it from independent shops such as Gresham Partners, Caliburn and Lazard, which provide advice but lack brokering divisions.
Pearly king
In a bidding war between a private equity group and a corporate buyer, the opportunity to achieve cost savings can be key – and the corporate will almost always have the upper hand.
In that context, it remains to be seen whether Catalyst Investment Management will see value in increasing the price of its offer to recapitalise PearlStreet now that Campbell Bros has upped its full bid for the testing company to 75c a share, up from an earlier 56c a share offer that had been rejected.
Before the price was increased, PearlStreet had been happy to stick with earlier plans for a $23 million investment by Catalyst at 50c a share, in return for a stake of at least 46 per cent.
Initially, PearlStreet, advised by Argonaut, decided in favour of the Catalyst proposal as it would allow shareholders to maintain exposure to PearlStreet's solid growth prospects.
However, Campbell, advised by JPMorgan, was able to increase its bid substantially due to the significant cost savings available from combining its business with PearlStreet.
PearlStreet's managing director, Anthony Wooles, who controls 51.5 per cent of the company, has already agreed to sell a binding option over a 19.9 per cent stake to Campbell, and the board has accepted the bid in the absence of a higher offer.
Catalyst is still considering its options. But its would take a big boost in the price for its recapitalisation proposal to appear viable against Campbell's offer.
If Catalyst does walk away, it is entitled to a break fee of $910,000 for its troubles.
Tech work
The venture capital firm OneVentures is seeking at least $20 million to launch the OneVentures Innovation Fund, a technology fund with investments in clean technology and life sciences.
The fund, which has already received a $20 million licence from the Government, is due to close in the second half of next month with a target of $50 million. BBY has underwritten the $20 million private capital commitment.
jfreed@smh.com.au
Briefs
Retail
Woolies sackings Woolworths has confirmed it has sacked three executives in its buying group for a breach of its code of conduct, but the supermarket giant has refused to confirm if the allegations revolved around alleged kickbacks and the Sydney Market. There is speculation of irregularities relating to Woolworths's sourcing of fresh fruit and vegetables from the market.
Gaming
Betting on pubs VenueNet is to challenge the retail betting giants by installing dozens of internet betting terminals in pubs and other venues in NSW, Victoria and Queensland in the next fortnight.
Resources
Genesis revelations Shares in Genesis Resources backtracked after the junior minerals explorer made its debut on the ASX yesterday. Genesis recently raised $4 million in its initial public offer of 15 million shares at 20c each plus a further 5 million shares in over-subscriptions. It closed steady at 16c.
Property
Confidence on rise RP Data says improving consumer confidence is driving a rise in property sales deals, even though affordability remains low. It says that while it will not give any earnings guidance for 2009-10, it expects to gain market share as the recovery gathered pace.
First published by Smh.com.au on October 28 2009
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