Gunns threat, imploding tollroads and Alinta-AGL battle

1. Bullying Gunns enters Tasmanian election fray

By Stephen Mayne, Gunns shareholder

John Gay, the executive chairman of world champion tree lopping outfit Gunns Ltd, has teamed up with boofhead Tasmanian Premier Paul Lennon to provide a key diversion from the integrity questions that are swamping him, which even got a good run on The 7.30 Report last night.

Gay yesterday threatened to take his $1.4 billion Tamar Valley pulp mill offshore if enough Tasmanians vote Green to force a minority government. Former television journalist and Tamara Valley councillor Les Rochester could yet join our list of former hacks in Parliament as he is leading the community action against the pulp mill and is running as an independent in the seat of Bass.

Gay's threats to take his project to Malaysia or China is a classic scare tactic for a community that is still scarred by past minority governments with the Greens and therefore tends to strongly endorse majority Liberal or Labor governments. Fear and uncertainty is the strongest card that Lennon has to play, so his mate has got out of the gates early.

John Gay is a bully of the first order and aggressive conflict is the only way he knows to do business. The contrast with the way Dick Pratt got his pulp mill up in Tumut, NSW, with Green groups working as consultants is stark indeed.

I've got $3,000 invested in Gunns and was a failed board candidate at last year's AGM who ran on the platform that John Gay should not be the only prominent executive chairman of an Australian listed company who refuses to subject himself to election every three years.

Unfortunately for Gay, his mate Paul Lennon can't avoid elections so the two of them have cooked up this major diversion although it might backfire because of the controversy about Gunns doing some renovations on the Premier's historic home.

The Tasmanian election will be the first state poll since Jeff Kennett's 1999 defeat when the integrity and character of the Premier will be an important issue.

Benefits for relatives, special deals with the Packers and controversial home renovations are just three things that Lennon and Kennett, both large and intolerant men, have in common.

Gunns shares fell 12c yesterday but recovered 5c to $2.83 this morning, still a long way shy of its 12-month high of $4.67. Indeed, some shareholders think the stock will recover if the project is abandoned because the risks are large when you have a company capitalised at just $950 million building a complex $1.4 billion pulp mill.

Gay knows how to slaughter trees and export woodchips, but building a huge pulp mill is in another league and some in the market think this simple but aggressive man doesn't have the ability to deliver.


6. Tollroad fiascos and Bob Carr's unravelling legacy

By Stephen Mayne

Wasn't that an unfortunate juxtaposition, to have Foreign Correspondent plugging tonight's Bob Carr interview with Gore Vidal from Hollywood immediately after Four Corners have just given his legacy another belting with last night's program on tollroads deals that have gone wrong.

Carr is fast going the way of Bob Hawke in soiling his reputation by behaving badly in the first year out of office. Hawke never recovered from taking $10,000 to announce his retirement from Parliament on A Current Affair, taking more Packer cash as a reporter for 60 Minutes, drunkenly declaring Alexander Downer would be the next Prime Minister and trying to do grubby TAB deals in Vanuatu. Dumping Hazel and that bath robe appearance with Blanche didn't help either.

In Carr's case, people are angry with the indecent haste in which he landed that $500,000-a-year consultancy with Macquarie Bank – the biggest beneficiary of private-public partnerships that have screwed NSW taxpayers and motorists whilst hiding the true state of the budget.

On top of that, Carr joked around at the Cross City Tunnel inquiry about being a journalist by profession and is now taking some coin off Aunty to interview Gore Vidal, whose ego is on a par with Bob's.

The Cross City Tunnel debacle has been a huge blow to Carr and the public private partnership industry, despite the ridiculous spin being put out by the likes of Nick Greiner and Mark Birrell last night.

Greiner was the father of these deals with the original contract he and Bruce Baird did in the early 1990s with Macquarie Bank's Hills Motorway Group to build the M2.

The PM's older brother Stan Howard was Hills chairman and as former NSW Auditor-General Tony Harris pointed out, this was a deal in which "the investors in the M2 got 100% of their money back in the first year and 100% of their money back in the second year and a car still hadn't driven on the road".

Transurban ended up buying the $1 Hills units for more than $11 in a $2 billion takeover that showed how stupid the Greiner Government was, yet there was Greiner defending the Cross City Tunnel last night as chairman of German construction company Bilfinger Berger.

And what about this rubbish on Four Corners from Kennett's former Major Projects minister Mark Birrell:

Early '90s, Victoria, it was a disaster. There was literally no debt option – you had to get debt down. You can't imagine Melbourne without CityLink because CityLink has solved so many of its urban issues. But CityLink could not be afforded by government – it had to be brought down on the basis of private investment. There was no more debt option, there was no more tax option, so you used the third option.

Err, the contract was let in 1996 Mark, at which point the Victorian budget was already comfortably in surplus and the government was predicting it would fetch $20 billion from energy privatisation.

What Victorians finished up with was a $1.15 billion construction contract that has delivered about 800% for the equity holders while almost $200 million in toll revenues pours into Transurban's coffers for more than 30 years. It's been a disastrous deal and Macquarie Bank played the Kennett Government for fools before then hiring Kennett's Treasurer Alan Stockdale and making him a millionaire.

The emergence of private tollroads in Australia has been a complete debacle because incompetent governments continuously get taken to the cleaners, as Four Corners correctly pointed out last night.

21. Alinta proposes AGL merger – then a split

By Stephen Mayne, small AGL shareholder

After last night's audacious $900 million raid to snatch a 10% stake in AGL, Perth-based Alinta has this morning unveiled its merger proposal which involves the two companies getting together and then divorcing again to create separate listed energy and infrastructure businesses.

Demergers have been all the rage in recent years but I've never seen a hostile takeover proposal being predicated on then immediately separating the combined operation again.

At the moment, we have AGL and Alinta, two distinct companies, which was about to become three if AGL shareholders next month approved the ridiculously expensive $80 million separation of its energy and infrastructure assets.

Now Alinta has entered the fray and said it wants to keep the situation as just two companies but only after they pool their energy and infrastructure businesses with each other. It's all very complicated and expensive shuffling just to get a better share market rating as energy stocks continue to boom.

AGL and Westpac are our two oldest listed companies, so the notion of a $2.8 billion Perth upstart, which only floated 6 years ago, launching a hostile takeover bid for a $9 billion giant, brings back memories of Robert Holmes a Court's 1980s tilts at BHP.

The Big Australian was originally advised by an up and coming Graeme Samuel at Macquarie Bank and the Millionaire's Factory is in the thick of all the current action.

AGL chairman Mark Johnson is one of the original founders of Macquarie Bank and still chairs its investment banking division. How does he feel about Macquarie advising Alinta to launch this hostile merger, presumably after Johnson told his Macquarie mates to get nicked?

AGL shares were trading at $14.50 before the merger proposal and were at $18.30 yesterday so it is hard to see what all these grumbling institutions are talking about, but they've clearly persuaded Alinta to fork out a tasty $900 million in cash for the lucky few.

AGL shares peaked at $19.70 this morning before settling back at $19.25 by lunch time, a rise of 90c for the day. Alinta remains suspended but expect their stock to weaken when it comes back on this afternoon.

Finally, it is interesting that Barclay Global Investors snapped up 5.2 million AGL shares on February 15, lifting its stake to 6.1%. And who is one of the two top brokers for Barclays? None other than Macquarie Bank, but the Chinese walls were presumably working brilliantly as usual.

Copyright © 2022 The Mayne Report. All rights reserved

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