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CBD

When it comes to pay, best be obscure 

It appears the English language may struggle to provide a clear explanation of the multimillion-dollar packages paid to executives.

The Chief Executive Union of Australia has warned a proposal for companies to provide a "plain English summary statement" on their remuneration policies to shareholders is fraught with danger.

In its response to draft guidelines issued by the Productivity Commission on executive pay, the union (aka the Business Council of Australia) has warned companies could encounter a legal minefield in having to spell out their executive remuneration policies in plain English.

"It is difficult to see how the concept of 'plain English' can be appropriately defined in the law or how companies will comply with the requirement from a legal perspective," the union said.

Another problem it cited was the proposal for remuneration reports to spell out "actual levels of remuneration received by executives".

"Past experience has demonstrated that adding reporting requirements can instead increase the complexity and number of pages of reporting," it said.

Perth pulls 'em

The world's most isolated capital city has suddenly become a hotspot for annual meetings. Following Qantas's recent meeting in Perth, the Commonwealth Bank board will front its shareholders in the windy city today. It is unclear if CBA shareholders will observe a minute's silence for BankWest.

Lest they forgo 

Morgan Stanley has made some changes to its planned listing of its Investa Property fund, showing its bankers probably do not observe Remembrance Day.

It has extended the deadline for investors to lodge their "bidding sheets" for the revised offer to 11am today. Perhaps they already had a minute's silence when they agreed to cut their underwriting fees by $8.5 million.

Great build

The German construction company Bilfinger Berger has already stumbled with the planned initial public offering of its Australian operations.

Peter Brecht, Bilfinger's Australian boss, was taken off guard yesterday when asked which model would promote its listing.

"If they [shareholders] are going to expect to see some very attractive- looking girl like Jennifer Hawkins on our thing, construction is probably too blokey for that, so we probably need something different," he reasoned.

A saviour

The US hedge fund industry is mourning the loss of Sam Heyman, who has died at the age of 70.

The hedge fund owner is best known in Australia for helping in the implosion of the Macquarie-led private equity takeover of Qantas in 2007.

Heyman's fund failed to sell its stake to the consortium at the last minute, leading the bid to fall short.

Maybe we should thank him we still have a solvent national carrier.

Room to move up 

The outgoing head of the Wesfarmers industrial arm, Keith Gordon, must have ambitions of becoming a chief executive.

Gordon, who pocketed $3.6 million last financial year at Wesfarmers, yesterday was named as the replacement for the Emeco Holdings chief, Laurie Freedman, whose remuneration totalled $935,339 in the same period.

In signing up for his new role, Gordon will get a base salary of $850,000, up to $500,000 a year in long-term incentives and short-term bonuses equivalent to a year's base pay.

All of which means if he hits all his targets, he could get up to $2.2 million a year. Gordon must have been straight-up then, in the comments he provided to the market.

"I am excited about the prospect of leading Emeco," he said.
 
Double identity 

Laurie Freedman will still leave Emeco with 20 million shares (worth $18 million), which are mostly held through his family company, Temasek Holdings Pty Ltd.

Freedman bought the business, which shares the same name as the Singapore Government's investment company, from his Singaporean accountant in the 1990s.

"Laurie needed a shelf company and his accountant had one called Temasek Holdings," a spokesman explained.

The story goes that Freedman's accountant thought the shelf company, which was then worth nothing, would one day sell for a million dollars, given it shared its name with the sovereign wealth fund.

The 4.8 million options issued to Freedman when Emeco listed at $1.90 a share in 2006 were never in the money.

Got a tip? email srochfort@smh.com.au

 

Insider

Edited by Jamie Freed

Bankers say 'ja' to Bilfinger role 
 
Investment bankers have until next week to ready their initial pitches for a role in Bilfinger Berger's $1 billion-plus float of its Australian division.

That's because Bilfinger's chief financial officer, Joachim Mueller, and at least one other senior company figure will fly from its German headquarters at the start of the week to help decide which banks will manage the float.

All of the major investment banks are keen to pitch, although a formal "beauty parade" looks unlikely at this stage.

The talk is that Deutsche Bank could be among the frontrunners, not only because of its German heritage, but because it recently underwrote a capital raising for the German parent company alongside BNP Paribas and Commerzbank.

However, Deutsche is sure to face strong competition from its peers. The last time Bilfinger completed a big deal in Australia – its 2004 purchase of Abigroup – it eschewed the big banks in favour of the accounting firm PricewaterhouseCoopers as its financial adviser, but this time it will need brokers to market the float.

Bilfinger will start readying the documentation once it selects its bankers next week so it can make a final decision on whether to proceed with the offering early next year.

Whether it will keep a minority stake in the company depends on the advice it receives from its chosen bankers.

However, it does not seem particularly keen to keep any of its Australian business – primarily construction – on its books as it increases its focus on the services sector in Europe.

Within the past 18 months, Bilfinger has also exited its French construction business. As for the future, the Australian arm hopes to complete some bolt-on acquisitions to expand its services division, which accounts for about one-fifth of its revenues, and to enter the contract mining arena.

Offer dumped 

Morgan Stanley and Macquarie Capital have bowed to pressure from fund managers and rejigged the terms of the Investa Australian Office Fund public offering after they were criticised for pricing the issue above its net tangible asset backing.

Morgan Stanley, which owns the assets, has agreed to pay for the $41.3 million of costs such as stamp duty out of its own pocket and slashed the underwriting fees by $8.5 million.

One wonders whether Morgan Stanley, as the owner of the assets, could be forced to take more of a hit on its fees than the hired help from Macquarie.

After these changes, the net tangible asset backing will rise to $2.93 – up from $2.79 previously – making the $3 issue price look more reasonable in a market where most property trusts are trading well below their asset backing.

Therefore, the size of the raising will fall to $900 million, from $950 million, not including a $50 million co-investment by Morgan Stanley.

In what surely represents a sign of the times, Investa has also committed to strengthening the independent board.

● Investa decided last night to can its offer following demands for a substantial discount from institutions.

Eyes on float

After the Myer experience, the market is keenly observing the institutional bookbuild for the $330 million float of the outdoor retailer Kathmandu, which is set to close today.

The indication last night was that all was going to plan and that the book was already covered at a good range within the set $1.65 to $1.90.

The book, managed by Goldman Sachs JBWere and Macquarie Capital, closes at midday today and institutions are set to own at least 60 per cent of the company.

Nothing has been finalised yet, but the private equity owners of Kathmandu, GSJBW and Quadrant Private Equity, appear likely to follow the lead of Myer's owners and make a complete exit.

The primarily Australasian small cap funds buying into Kathmandu – a stock more comparable to JB Hi-Fi, The Reject Shop and Super Cheap Auto than Myer – will be hoping the overall market performs well ahead of the listing on Friday.

Myer closed at $3.82 yesterday, below the bottom end of its bookbuild range of $3.90 to $4.90. RIO

Still in game

Rio Tinto's long-awaited float of its US coal business under the moniker Cloud Peak Energy is going ahead.

But in a twist that might surprise many in the market, Rio will keep up to 48.33 per cent of Cloud Peak.

Rio has filed with the US Securities and Exchange Commission to sell 35 million shares at $US16 ($17) to $US18 each, for total proceeds of up to $US633 million.

However, that represents only 51.67 per cent of the business. The remainder will remain in Rio's hands, apart from a maximum of 4.6 million shares that could be issued to the underwriters, which include investment banks such as Morgan Stanley, Credit Suisse, RBC Capital Markets and JP Morgan.

Rio had earmarked its US coal division for sale nearly two years ago as part of a plan to repay its debt from its Alcan acquisition.

It sold the Jacobs Ranch mine to Arch Coal for $US764 million this year, but found a float of the rest of the business was the easiest option after talks with Alpha Natural Resources about a trade sale fell over.

Rio views the US business as less attractive than its Australian coal business because its Powder River Basin production is sold to the US domestic market rather than to more lucrative Asian export markets.

It remains to be seen whether Rio will keep its stake in Cloud Peak for the long haul.

Briefs

Home loans

Rise spooks buyers The home loans market contracted by 11.5 per cent last month after buyers were spooked by the first interest rate increase in 19 months, the mortgage broker AFG said. It said it arranged $2.6 billion in mortgages, down from $2.9 billion in September.

Guidance

Breville upgrade The electrical goods importer and distributor Breville Group has upgraded its full-year earnings guidance from $17.8 million to $19 million and commissioned an independent expert to assess the $322 million takeover bid for the company from GUD Holdings.

Auction

Madoff sale Hundreds of pieces of jewellery, clothing and other personal items of the disgraced financier Bernard Madoff and his wife Ruth are to be auctioned. They range from a baseball jacket to a Rolex watch worth up to $US87,500 ($93,995).

Mining

BC gets agreement The iron ore explorer BC Iron and its joint-venture partner Fortescue Metals Group have secured $US50 million ($54 million) in an off-take agreement for their Nullagine joint venture, which involves the supply of 20 million tonnes of iron ore over the next 8 years.