Spicing up the Orica AGM
By Stephen Mayne
January 9, 2008
This is from the Mayne Report subscriber only edition of December 24, 2007.
The Orica AGM at Federation Square's BMW Edge last Friday was lively affair with a good corporate story to be told, but still plenty of sexy areas to explore for debate. However, the decision to hold its AGM on the last Friday because Christmas has earned Orica a place on our inconvenient AGMs list.
Sacked Orica contractor, John Clancy from Albury, made the rest of us shareholders look exceedingly polite by attending his 10th straight Orica AGM and again unloading with a stream of bile accusing the directors of being "liars, cheats and thieves" and the most incompetent board in the country. Seeing as the whole board and management has turned over since Clancy's punch-up with some boss on a WA mine site triggered his departure in the mid-1990s, it does seem strange that he keeps on fronting.
The Australian Shareholders Association opened up with an odd question about selective briefings to journalists after which I lobbed one about the $3.5 billion of value left on the table from Orica's sell-down of its 70% stake in Incitec Pivot at just $21 a share in May last year. Chairman Don Mercer congratulated Incitic Pivot for pulling off the brilliant $165 million Southern Cross acquisition from BHP-Billiton and riding the phospate boom, but didn't go anywhere near an apology or mea culpa as you can hear in this audio file.
On the question of the indicative $32 a share private equity takeover offer mid-year, Mercer kept stressing how it was highly conditional and subject to due diligence. He alluded to other companies chasing such transactions which subsequently fell over, opening the door for a chance to point the finger at Orica director Gary Hounsell, who doubles as one of the Qantas directors who embraced APA and a Nufarm director who endorsed the Chinese Government's indicative bid along with two private equity firms which never materialised.
Hounsell received this special spray when it came to his re-election and a handul of shareholders joined in the protest over what happened at Qantas. It's the same principle as applies to Centro chairman Brian Healey - you can't do something bad at one company and not expect it to be mentioned when you face election elsewhere as these black marks go against your overall record as a professional director.
There were a few other interesting moments. When former Shell executive Peter Duncan was up re-election, I asked about the three-man "Shell faction" now that current Shell chairman Russell Kaplan has joined another old Sheller in chairman Don Mercer on the Orica board. Mercer gave a good answer about Shell being a good hunting ground for Orica given both companies run large processing plants.
Mercer declined to take the bait when I asked how Cathy Walter and Peter Duncan were getting along inside the remuneration committee given that they were on opposite sides of the NAB board war three years ago and were seated at opposite ends of the table on Friday. He also declined to reveal the size of dealings with Newcrest, despite the fact he chairs both companies.
The remuneration report copped a larger than expected protest vote of 18.3 million shares or 12.24%, which was probably related to the retention payments offered to the senior management earlier in the year, along with the rising loans outstanding on the executive incentive scheme. Mercer conceded that Orica has the same "Centro-style exemption" that sees the loans forgiven if the company goes broke.
Have a listen to the remuneration report exchanges which finished with a big round of applause when I gave the company a pat on the back for good performance at the end of the meeting. After all, CSL and Orica are the only two successful Melbourne-based companies left which can truly claim to have global sales and are not run by an imported CEO.
Orica is now capitalised at $10 billion, but the $32 shares would be closer to $45 if they hadn't surrendered all that Incitec-Pivot upside. Still, if you remember Orica at $5 a few years back, you shouldn't complain too much.
The full edited Orica audio exchanges are available here.
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