Rupert, AFIC tilt, Federal election, Newcrest, AGM season, capital raisings, pokies and Indi
September 5, 2013
Dear Mayne Report readers,
AFIC board tilt to create cultural change with big end of town corporate voting and disclosure
It's polling season in Australia, so we've taken a run at the board of the Australian Foundation Investment Company on a platform that they vote their $6 billion portfolio more strategically to drive better governance outcomes, whilst also publicly disclosing their voting record.
Voting is open, there are 96,000 shareholders, no institutional bloc votes and we'll know the results at the AFIC AGM in Melbourne on October 9. This run at the board of Australia's biggest listed investment company is the most winnable of our 41 public company board tilts over the years.
The trigger for this tilt was AFIC's complicity with excessive Lowy family salaries at Westfield, which were referenced in this piece today in The Australian.
The AFIC board, led by Bruce Teele and his old mate Don "Don't Argue" Argus, are playing dirty pool with the most biased ballot paper we've ever seen from an ASX listed company, as is explained in great detail here.
Newcrest report triggers new selective briefings debate
Maurice Newman, the former ASX Ltd chairman and chair of Tony Abbott's Business Advisory Group, has triggered quite a debate today in the corporate world with his tough recommendations to the Newcrest board on continuous disclosure.
Newman's 17 recommendations appear to go well beyond the issues raised in the actual report. Many of them are good and worth exploring.
Tony Abbott, Joe Hockey and Matthias Corman will inevitably find themselves dealing with questions of a legislative response to all this given the elevated status that Maurice Newman holds in Coalition circles and the decision of the Newcrest board to release his full report to the public.
Rupert, Rupert, Rupert
First up on the political front in this final pre-election edition, check out Get-up's banned television ad on Rupert Murdoch's propaganda sheets which has now scored more than 420,000 views on Youtube and proved to be the internet success story of this election campaign.
It just goes to show that in the age of the internet, silly old media bans by the big free-to-air commercial networks only serve to create more attention for the message that is gagged.
Whilst the Murdoch press were typically partisan in their refusal to cover the Get-up gag story, The World Today and ABC radio's PM program both gave it a good burst.
The question I posed on PM was this: "If the Murdoch press treated Tony Abbott like they treated Kevin Rudd, would Labor win a third term?" In my view, Rupert could have delivered Rudd a win, such has been the ferocity and effectiveness of the political attacks co-ordinated by the New York-based billionaire who isn't even allowed to vote in this election.
And this is what makes the Get-up ad ban so outrageous. All they were doing was attacking someone who was ferally interfering in Australian politics from abroad. Doesn't this also highlight the joke which is Australia's cross-media laws where Lachlan Murdoch can sit there as chairman or Network Ten where his executives, naturally enough, decided to ban an ad bagging his family's main media vehicle.
Finally on the Murdoch issue, check out this first outing for The Guardian tracking the history of the Rudd-Rupert relationship. I really enjoyed writing a detailed 1600 word piece on this issue.
Interestingly, there's a protest planned at News Corp's HQ in Sydney tomorrow which is gathering momentum. Details are here. Participants should keep it civil, unlike the editorial content of the Murdoch tabloids this season. The Australian's journalists famously went on strike during the 1975 election claiming the company had become too partisan in its campaign to unseat Gough Whitlam. So far, we haven't heard a peep from anyone on the News Corp Australia payroll but Fairfax Media chairman Roger Corbett was absolutely right on Lateline two nights back when he said the following:
"To be as strongly biased as News have been in the last few months, I do think does a great damage to the credibility of press, at just the time when the press needs to be highly respected as we go through this digital transition."
Surprise, surprise, Roger found himself Cut&Pasted in The Australian today.
An evening with David Williamson and "Rupert"
As The Age reported on Tuesday, we very much enjoyed David Williamson's play "Rupert" on Saturday night, but it was a little disappointing there was no mention of the appalling corporate governance at News Corp that has been discussed at many an AGM over the past 15 years.
We heard from Williamson about the rural gerrymander which entrenched anti-Murdoch South Australian premier Thomas Playford in the 1950s, but nothing about Rupert's own gerrymander at News Corp where almost 70% of the shares on issue don't get a vote.
Alas, there will be plenty of opportunities to talk about that tonight with David Williamson during a free City of Melbourne event at the Playhouse.
All the details are here, but bookings have already topped 700 so don't be late and why not take advantage of the package deal to watch the play straight after the debate with Margaret Simons, Leslie Canold, David Williamson and yours truly.
All set for a big AGM season as policy paper submissions pour in
The Australian Shareholders' Association has just published an updated monitoring list for the forthcoming AGM season which lists the companies we'll be covering in chronological order. The media reports are starting to warm up as can be seen with this piece in The Australian today about executive pay in the property sector.
The first big AGM of the season is ASX Ltd itself on September 25 as they demonstrate to the wider market that is possible to get your house in order and have an AGM less than 3 months after year-end.
ASA has signalled in our recent policy discussion paper that we'll be getting tougher on directors who structure capital raisings which disadvantage retail shareholders. Submissions on the policy paper close next Tuesday and we're encouraging interested parties to send them direct to administrator@asa.asn.au.
So far, we've had more than 40 submissions and we'd love to finish up with close to 100.
ASX Ltd capital raising disadvantages retail investors
Interestingly, ASX itself might prove an interesting test of our resolve on capital raisings because they have just disadvantaged retail shareholders by conducting separate bookbuilds for retail and institutional shareholders to deal with the shortfall from the recent $553 million 2-for-19 capital raising priced at $30 a share.
Retail investors usually finish up with less when this happens and in the ASX raising, non-participating institutions were paid $3.70 per share whilst retail shareholders only received $3.40 per share in compensation for being diluted.
ASA issued this recent press release calling for federal legislative reform in several areas and the relevant paragraph to the ASX capital raising was a recommendation that whoever forms government: “Shorten minimum time frame for entitlement offers to 10 working days and mandate a single book build for the shortfall to pick up qualifying institutional, ineligible foreign holders and retail non-participants.”
It's not hard to do a single bookbuild offer. Just go back and look at this $806 million Lend Lease capital raising in 2010.
The two ASX directors up for election on September 25 are former Treasury Secretary Ken Henry and former UBS boss Shane Finemore.
The Ken Henry appointment is an interesting one given his testy relations with the Coalition and ASX's reliance on government regulation for its profits.
As Treasury Secretary right through the GFC, Ken Henry was ultimately the bureaucrat who oversaw the massive dilution that retail investors suffered at the hands of institutions during the $100 billion capital raising binge. What Wesfarmers did in 2009 was a classic example and you can read all about that here.
The British don't allow all this discrimination against retail investors and show far greater respect for the property rights of small investors. Ken Henry's view on all this might make for some interesting discussions at the ASX AGM in 3 weeks time.
How retail investors have lost out with separate bookbuilds
Here's the evidence on how retail shareholders have lost out when institutions are offered the first opportunity to sell their rights:
Westfield: did a $3 billion 2-for-23 rights issues at $19.50 a share in June 2007. The retail take up was 15.7 million shares and the surplus of 22.9 million were sold into a bookbuild at $19.50, with no premium. The institutional bookbuild fetched $19.60, so institutions collected 10c compensation for not participating.
Primary Healthcare: did a $1.231 billion entitlement offer at $5.40 in early 2008 which raised $958 million from institutions and was about 80% subscribed. The shortfall generated a premium of $1.20 per share. Retail only invested $70 million and non-participants only collected 10c per share as the broader market was weakening.
Alumina: raised $910 million through a renounceable 5-for-19 offer at $3 a share in September 2008 which saw retail investors who didn't participate receive a 35c premium courtesy of the institutional bookbuild. This was less than the 70c paid to the 8% of institutional holders who declined the offer.
Wesfarmers: $2.9 billion entitlement offer at $29 in 2008. Institutions took up 96% and the shortfall attracted a premium of $8.25 from the bookbuild. Retail investors received a premium of $9.75 from the bookbuild. A rare win for retail!
FKP: a $324 million renounceable offer in 2009 at 40c. The $204 millioninstitutional component was 97% subscribed and the shortfall clearing price was 46c a share, giving the non-subscribing institutions 6c a share. The $120 million retail offer was only 46% subscribed but the 162 million share shortfall generated no compensation in the retail bookbuild conducted a few weeks later.
Orica: a $900 million 1-for-8 entitlement offer at $22.50 in mid-2008. Institutions took up 70% of their entitlement and non-participants received 25c in the bookbuild. Retail investors only took up just over half of their entitlement, leaving a shortfall of 6.3m shares which attracted a 10c premium in the retail bookbuild.
Connect East: 1-for-2 entitlement offer in August 2009. Institutional component 87% subscribed and whilst the institutions received 3.5c a unit, the retail investors received only 0.5c a unit.
Sigma Pharmaceutical: did a 1-for-3 at $1.02 in September 2009. The institutional shortfall went off at $1.07, giving the institutions that did not subscribe a payment of 5c a share. The retail bookbuild went off at the issue price, leaving nothing for the holders that did not take up their entitlements.
ALE Property Group: entitlement offer in 2009. The $64 million institutional component attracted a 50c premium for non-participants and retail received 41c, but this was unusual because retail could also apply for overs.
Rio Tinto: everyone renounced, institutions and retail on the same terms, although it was slightly different for UK and Australian shareholders.
Lend Lease: launched a 5-for-22 offer at $7.70 in 2010 to raise $806 million. Was most unusual with a combined book build of 28.2m shares which sold at $8.60, given non-participants 90c in compensation.
ALS Ltd: the old Campbell Bros raised $246m at $7.80 a share in 2013. The $112 million institutional component was 92% taken up and non-participants received 95c for their rights. The retail shortfall was 3.89m shares and each attracted a value of 95c in the bookbuild.
ASX Ltd: conducted a $553 million entitlement offer in 2013. Institutions received $3.70 in compensation, whereas retail investors only received $3.40.
Pokies pusher Kevin Andrew takes a comfortable walk in the park in Menzies
The Labor candidate has been so invisible in Menzies that the local paper hasn't even been able to raise him for any comment.
This has given chief Coalition pokies pusher Kevin Andrews a very easy run, as was explained in our August 19 edition. Labor did have a different option, as was revealed by Hillary Bray in The Australian's Strewth column.
Abolishing the national gaming body and creating an advisory group comprising gaming industry types is also a big worry under the incoming Abbott government.
Elsewhere in the pokies debate, the Victorian Coalition government has used the cover of the Federal election to release its proposed voluntary pre-commitment system which is a complete joke.
Former Gaming Minister turned Treasurer Michael O'Brien talked about evidence-based policy when the Victorian model has been shown to fail during 4 different trials.
On the local front, it is good to see the Whittlesea community, which includes part of the marginal Federal seat of McEwen, have grasped the message about pokies.
Signs have been erected and they even have their own impressive web site.
The Whittlesea campaign raises awareness of the problem of poker machine harm with over $93 million lost last year in just one of the 31 councils which cover greater Melbourne. The solution to reduce the harm is the evidence-based reform of a $1 maximum bet so that gambling losses are limited to $120 an hour.
Finally, try watching this 30 second anti-pokies ad featuring our daughter Alice, who was 6 at the time:
A few Federal election thoughts and predictions
I'm coming off the ASA payroll tomorrow in order to be financially at arms length during the AFIC board tilt which will be resolved on October 9. It also should be stressed that any political commentary in this newsletter is completely independent of the ASA. Therefore, the following thoughts are mine and mine alone and future Mayne Report email editions will have less political coverage:
Mirabella defeat would help City of Wangaratta recover
Firstly, it would be great to see Nationals-backed independent Cathy McGowan prevail over Sophie Mirabella in Indi.
Mirabella won the nasty prize from both Tony Windsor and Rob Oakeshott in the last Parliament and her associate Dr Julian Fidge, a former soldier, has been involved in considerable conflict at the City of Wangaratta, which is currently regarded as the most dysfunctional of Victoria's 79 councils.
If Mirabella loses on Saturday, it will improve the prospects of a sensible resolution of the problems at Wangaratta.
Interestingly, it has been Victoria's National Party Local Government minister who has been throwing the book at Wangaratta, even appointing a former HSU official Peter Stephenson as the municipal inspector. However, she's been sitting on his report.
Will the Libs have a majority in their own right without the Nats?
With all this talk about Lib-Nat tensions, it is surprising that the mainstream media is not crunching the numbers on what Tony Abbott needs to do to achieve a house of reps majority in his right.
The Nats will lose considerable leverage if they are unable to threaten to bring on an early election.
Simon Sheikh for ACT Senate
The pro public service Greens have been subjected to a nasty campaign in Canberra.
There is considerable concern in Canberra about Abbott's proposed public service cuts, so much so that Greens ACT Senate candidate Simon Sheikh is firming as a good chance to win the second spot ahead of the Libs. He would be a good addition to the Federal Parliament. Interestingly, Canberra is the only major Australian city where Rupert Murdoch doesn't have a local newspaper. Therefore, The Australian's vicious campaign against Simon Sheikh may yet prove to have failed to prevent his elevation to the Federal Parliament from Monday.
Support the S*x Party in Victoria
Fiona Patten is the best candidate for the Australian Sex Party and received a huge run on ABC TV's Gruen Nation last night. Whilst the Greens will probably win a Victorian quota in their own right, don't rule out the S*x Party in Victoria, especially if the Labor vote comes under severe pressure. Senator Patten would be an interesting and healthy counter to the extremely conservative DLP-style social views held by Tony Abbott. That said, Abbott presented well on Kitchen Cabinet last night as he plays down his DLP history and talks up party consensus.
Clive Palmer's Brick with Eyes will fall short, unlike Xenophon
The Murdoch press have also gone to war with Clive Palmer in an attempt to prevent his lead Queensland Senate candidate, Glenn Lazarus, from winning the final Senate spot in Queensland. I was sympathetic to Palmer as he took on the Murdochs, but his description of ABC reporter Sabra Lane as "you poor woman" on The World Today this afternoon was beyond the pale.
Palmer's Queensland senate candidate man lacks the preference flow to get over the line and will probably end up electing Bob Katter's man, country crooner James Blundell. Coles and Woolies had better watch out if he lands the balance of power.
With Abbott now expected to win comfortably, the game now turns to the Senate. Nick Xenophon is a good chance to win a second spot in South Australia at the expense of Labor's faceless man Don Farrell.
I wouldn't be surprised if the 2nd SA Liberal, Simon Birmingham, also came a cropper at the hands of wealthy Family First candidate Bob Day, who went close in 2010 and has even better preference flows this time. The other outside tip is former West Coast Eagles indigenous player David Wirrpunda in WA. That would be great win for the Nats and the nation as we move towards Indigenous recognition in the Australian constitution during the next term of government.
Firing up our Youtube channel again
When The Mayne Report first launched in 2007 we were posting daily videos on our Youtube channel. Alas, the cost and time of in-house video production, plus the lack of any revenue, made this model unviable. Besides, daily videos wasn't necessarily the best way to campaign for better corporate governance through shareholder activism.
In the end, it made more sense to channel our efforts into appearing on mainstream media video platforms. People watch Q&A, Inside Business and The Project.
However, when you look back at all the video we've got spanning our own productions, one-off interviews, profiles or lengthy interviews such as Nine's Sunday program or ABC TV's Talking Heads, the regular spot on Sky's Business View and webcasts of AGMs, it turns out we've got a rather large library of material, some of which is now available on our Youtube channel.
Some of the playlists on our video site including the following:
11 rounds with Rupert Murdoch
A few rounds with the Millionaires at Macquarie Group
Bye bye Babcock & Brown
The pokies
Gender equity and media trustworthiness in Intelligence Squared debates
Skewering Col Allan on Channel Nine's Sunday program
Melbourne pushing good governance measures through Municipal Association of Victoria
The agenda for next Tuesday's Future Melbourne Committee meeting is expected to go live at 2pm today here.
There's plenty to discuss but councilors should check out Melbourne's proposed motions for the next MAV state council.
We're pushing directly elected mayors, more public questions of councilors, audio of council meetings and more comprehensive minutes of meeting which automatically reflect how individual councilors vote, without the need for calling a division.
Sign up for campaign and governance Tweets
Click on the image above to join almost 18,00 followers on Twitter. We are regularly dropping out observations about journalism, politics, breaking stories, local government and shareholder activism. For example, here are a few Tweets from the past 24 hours about the appearance of Fairfax Media chairman and outed Liberal Party member Roger Corbett on Lateline two nights back:
# The Fairfax board should be meeting to secure Roger Corbett's retirement before this year's AGM. Far too partisan for an "indie" media chair.
# Fairfax's largest shareholder Gina Rinehart will be very pleased with Corbett's Rudd-bashing. She may now spare Roger a 2nd strike on rem.
# After a woeful record over 10 years on Fairfax board, Roger Corbett would probably be voted off at 2013 AGM if his term didn't end next year.
# Roger Corbett has always been a hard man on IR reform. Unleashing IR warrior Michael Stutchbury on The AFR was Corbett's big political move.
# Roger "papers will never die" Corbett and his best buddy Ron Walker (ex Lib bagman) did more damage to Fairfax than Rudd did to the ALP.
# Roger Corbett's extraordinary electoral intervention on Lateline completely cuts across Fairfax Media's "independent" advertising campaign
Labor Senator Doug Cameron is completely wrong to say that Corbett should resign from the RBA board because he's a Liberal Party member.
The bigger question is whether an independent media company should be chaired by a Liberal Party member who makes partisan interventions in the last week of an election campaign. This point is brought into sharp relief when you consider the partisan conduct of News Corp. With more than 80% of Australia's newspapers in the hands of just 2 companies, you need some diversity of views that doesn't appear to be there with Rupert Murdoch and Roger Corbett. That said, Roger has very limited influence over Fairfax editors, whereas Rupert directly calls the tune at News through loyal lieutenants.
From the member edition archive
The Mayne Report goes to more than 17,000 people but if you're a relatively new reader, here are some links to some of the more interesting email editions sent out over the past five years.
2012
Backing Rudd, Lachlan Murdoch, Bob Brown media debate, Manningham governance, Gunns, Darebin, Lend Lease and St Kilda AGM appearance
Monday, February 20, 2012
The OZ goes mad, Murdoch piracy, AFR, pokies double rate, Gina unfit for Ten, council super blowout, BoQ rip-off, power speech and AGM mini-season
Wednesday, April 4, 2012
2011
Murdoch special, media inquiry, pokies, Manningham win, Zara, secretive Shortenite councillors and a Vodafone take-down
Thursday, September 15, 2011
Elected to ASA board, pokies, Rio, Santos, RHG, Hartigan, Manningham, capital raisings and Rich List
Thursday, May 19, 2011
2010
Election wash-up, Mayne Report strategic review, Manningham, Ten, Gina, Falloon for Fairfax, Orica AGM, ABC year-ender, Cornwall, Rich List and then some
Friday, December 17, 2010
Woolies anti-pokies campaign speech, Manningham mayor boxes on, campaigning for women, Bob Brown, pokies forum, HTVs, Rich List and then some
Thursday, November 18, 2010
Paperlinx, Packer, Murdoch, Manningham, pokies, Rich ex wives, foreign takeovers and much more
Saturday, October 23, 2010
DJs, legislate women on boards, ex Lib goes no pokies, preferences, Pratt-Shorten, Labor's debt, AG's report, Manningham council audio and then some
August 3, 2010
Director rankings, Rio, Westfield, New Matilda, MAP, Manningham, Paatsch, state election, Darebin, Moreland, rich list, pokies and much more
June 9, 2010
Political donations, Stokes, Westfield tower, Richard Colless, Manningham nursing home, state debt, Rich List, Grand Prix and more
February 23, 2010
2009
Woolies, Higgins, Manningham, upcoming elections, Fairfax, Centro, Rich List, Rams, Fitzie and much more
December 6, 2009
Seven AGM, crazy Perth visit, Fairfax, Telstra, Transfield, capital raisings and much more
November 9, 2009
News Corp AGM, Packer, Fairfax, James Strong, Woolies, Eastern Golf, Kohler-Gatto and much more
October 20, 2009
Bad Bendigo, Mark Day, Manningham, pokies, NAB, Asciano, Rich List, Paladin, hostile EGMs and much more
September 15, 2009
Macquarie AGM, Melbourne's decline, Asciano EGM, capital raisings, Goyder's pokies, speeches, fire, AGM diary and much more
July 28, 2009
2008
Collingwood AGM, Rizzo survives, ANZ shareholders MIA and Qantas delusions
December 19, 2008
ABC Learning, CBA's Centro brutality, sworn in, pokies, PacBrands and SPP plays
December 10, 2008
After 37 straight defeats, the drought is broken
December 1, 2008
71% backing at Centro, $11bn backing at BHP and huge Qantas protest
November 28, 2008
BHP backflip after $7bn backed our tilt
November 26, 2008
Combank's $700m ABC Learning debacle
November 13, 2008
2007
Fortescue Metals AGM: time for Twiggy and FMG to grow up
Sunday, November 8, 2007, 10.30pm
How $5bn worth of votes backed us against Rupert's dodgy gerrymander
Saturday, 20 October, 2007, 7.20am
Mayne family news
Laura and Alice are at a school camp in town this week and they both came in with their class mates yesterday for a tour of the Melbourne Town Hall.
Laura also broke her arm at camp this week and we spent a few hours at emergency in the Children's on Monday night. However, she's back on camp now and holding up well.
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is an email newsletter which seeks to promote transparency and good governance in the corporate, political and media worlds. It is published by Stephen Mayne, the founder of Crikey.com, shareholder advocate and City of Melbourne councilor. To unsubscribe from this email list, click here.
AFIC board tilt to create cultural change with big end of town corporate voting and disclosure
It's polling season in Australia, so we've taken a run at the board of the Australian Foundation Investment Company on a platform that they vote their $6 billion portfolio more strategically to drive better governance outcomes, whilst also publicly disclosing their voting record.
Voting is open, there are 96,000 shareholders, no institutional bloc votes and we'll know the results at the AFIC AGM in Melbourne on October 9. This run at the board of Australia's biggest listed investment company is the most winnable of our 41 public company board tilts over the years.
The trigger for this tilt was AFIC's complicity with excessive Lowy family salaries at Westfield, which were referenced in this piece today in The Australian.
The AFIC board, led by Bruce Teele and his old mate Don "Don't Argue" Argus, are playing dirty pool with the most biased ballot paper we've ever seen from an ASX listed company, as is explained in great detail here.
Newcrest report triggers new selective briefings debate
Maurice Newman, the former ASX Ltd chairman and chair of Tony Abbott's Business Advisory Group, has triggered quite a debate today in the corporate world with his tough recommendations to the Newcrest board on continuous disclosure.
Newman's 17 recommendations appear to go well beyond the issues raised in the actual report. Many of them are good and worth exploring.
Tony Abbott, Joe Hockey and Matthias Corman will inevitably find themselves dealing with questions of a legislative response to all this given the elevated status that Maurice Newman holds in Coalition circles and the decision of the Newcrest board to release his full report to the public.
Rupert, Rupert, Rupert
First up on the political front in this final pre-election edition, check out Get-up's banned television ad on Rupert Murdoch's propaganda sheets which has now scored more than 420,000 views on Youtube and proved to be the internet success story of this election campaign.
It just goes to show that in the age of the internet, silly old media bans by the big free-to-air commercial networks only serve to create more attention for the message that is gagged.
Whilst the Murdoch press were typically partisan in their refusal to cover the Get-up gag story, The World Today and ABC radio's PM program both gave it a good burst.
The question I posed on PM was this: "If the Murdoch press treated Tony Abbott like they treated Kevin Rudd, would Labor win a third term?" In my view, Rupert could have delivered Rudd a win, such has been the ferocity and effectiveness of the political attacks co-ordinated by the New York-based billionaire who isn't even allowed to vote in this election.
And this is what makes the Get-up ad ban so outrageous. All they were doing was attacking someone who was ferally interfering in Australian politics from abroad. Doesn't this also highlight the joke which is Australia's cross-media laws where Lachlan Murdoch can sit there as chairman or Network Ten where his executives, naturally enough, decided to ban an ad bagging his family's main media vehicle.
Finally on the Murdoch issue, check out this first outing for The Guardian tracking the history of the Rudd-Rupert relationship. I really enjoyed writing a detailed 1600 word piece on this issue.
Interestingly, there's a protest planned at News Corp's HQ in Sydney tomorrow which is gathering momentum. Details are here. Participants should keep it civil, unlike the editorial content of the Murdoch tabloids this season. The Australian's journalists famously went on strike during the 1975 election claiming the company had become too partisan in its campaign to unseat Gough Whitlam. So far, we haven't heard a peep from anyone on the News Corp Australia payroll but Fairfax Media chairman Roger Corbett was absolutely right on Lateline two nights back when he said the following:
"To be as strongly biased as News have been in the last few months, I do think does a great damage to the credibility of press, at just the time when the press needs to be highly respected as we go through this digital transition."
Surprise, surprise, Roger found himself Cut&Pasted in The Australian today.
An evening with David Williamson and "Rupert"
As The Age reported on Tuesday, we very much enjoyed David Williamson's play "Rupert" on Saturday night, but it was a little disappointing there was no mention of the appalling corporate governance at News Corp that has been discussed at many an AGM over the past 15 years.
We heard from Williamson about the rural gerrymander which entrenched anti-Murdoch South Australian premier Thomas Playford in the 1950s, but nothing about Rupert's own gerrymander at News Corp where almost 70% of the shares on issue don't get a vote.
Alas, there will be plenty of opportunities to talk about that tonight with David Williamson during a free City of Melbourne event at the Playhouse.
All the details are here, but bookings have already topped 700 so don't be late and why not take advantage of the package deal to watch the play straight after the debate with Margaret Simons, Leslie Canold, David Williamson and yours truly.
All set for a big AGM season as policy paper submissions pour in
The Australian Shareholders' Association has just published an updated monitoring list for the forthcoming AGM season which lists the companies we'll be covering in chronological order. The media reports are starting to warm up as can be seen with this piece in The Australian today about executive pay in the property sector.
The first big AGM of the season is ASX Ltd itself on September 25 as they demonstrate to the wider market that is possible to get your house in order and have an AGM less than 3 months after year-end.
ASA has signalled in our recent policy discussion paper that we'll be getting tougher on directors who structure capital raisings which disadvantage retail shareholders. Submissions on the policy paper close next Tuesday and we're encouraging interested parties to send them direct to administrator@asa.asn.au.
So far, we've had more than 40 submissions and we'd love to finish up with close to 100.
ASX Ltd capital raising disadvantages retail investors
Interestingly, ASX itself might prove an interesting test of our resolve on capital raisings because they have just disadvantaged retail shareholders by conducting separate bookbuilds for retail and institutional shareholders to deal with the shortfall from the recent $553 million 2-for-19 capital raising priced at $30 a share.
Retail investors usually finish up with less when this happens and in the ASX raising, non-participating institutions were paid $3.70 per share whilst retail shareholders only received $3.40 per share in compensation for being diluted.
ASA issued this recent press release calling for federal legislative reform in several areas and the relevant paragraph to the ASX capital raising was a recommendation that whoever forms government: “Shorten minimum time frame for entitlement offers to 10 working days and mandate a single book build for the shortfall to pick up qualifying institutional, ineligible foreign holders and retail non-participants.”
It's not hard to do a single bookbuild offer. Just go back and look at this $806 million Lend Lease capital raising in 2010.
The two ASX directors up for election on September 25 are former Treasury Secretary Ken Henry and former UBS boss Shane Finemore.
The Ken Henry appointment is an interesting one given his testy relations with the Coalition and ASX's reliance on government regulation for its profits.
As Treasury Secretary right through the GFC, Ken Henry was ultimately the bureaucrat who oversaw the massive dilution that retail investors suffered at the hands of institutions during the $100 billion capital raising binge. What Wesfarmers did in 2009 was a classic example and you can read all about that here.
The British don't allow all this discrimination against retail investors and show far greater respect for the property rights of small investors. Ken Henry's view on all this might make for some interesting discussions at the ASX AGM in 3 weeks time.
How retail investors have lost out with separate bookbuilds
Here's the evidence on how retail shareholders have lost out when institutions are offered the first opportunity to sell their rights:
Westfield: did a $3 billion 2-for-23 rights issues at $19.50 a share in June 2007. The retail take up was 15.7 million shares and the surplus of 22.9 million were sold into a bookbuild at $19.50, with no premium. The institutional bookbuild fetched $19.60, so institutions collected 10c compensation for not participating.
Primary Healthcare: did a $1.231 billion entitlement offer at $5.40 in early 2008 which raised $958 million from institutions and was about 80% subscribed. The shortfall generated a premium of $1.20 per share. Retail only invested $70 million and non-participants only collected 10c per share as the broader market was weakening.
Alumina: raised $910 million through a renounceable 5-for-19 offer at $3 a share in September 2008 which saw retail investors who didn't participate receive a 35c premium courtesy of the institutional bookbuild. This was less than the 70c paid to the 8% of institutional holders who declined the offer.
Wesfarmers: $2.9 billion entitlement offer at $29 in 2008. Institutions took up 96% and the shortfall attracted a premium of $8.25 from the bookbuild. Retail investors received a premium of $9.75 from the bookbuild. A rare win for retail!
FKP: a $324 million renounceable offer in 2009 at 40c. The $204 millioninstitutional component was 97% subscribed and the shortfall clearing price was 46c a share, giving the non-subscribing institutions 6c a share. The $120 million retail offer was only 46% subscribed but the 162 million share shortfall generated no compensation in the retail bookbuild conducted a few weeks later.
Orica: a $900 million 1-for-8 entitlement offer at $22.50 in mid-2008. Institutions took up 70% of their entitlement and non-participants received 25c in the bookbuild. Retail investors only took up just over half of their entitlement, leaving a shortfall of 6.3m shares which attracted a 10c premium in the retail bookbuild.
Connect East: 1-for-2 entitlement offer in August 2009. Institutional component 87% subscribed and whilst the institutions received 3.5c a unit, the retail investors received only 0.5c a unit.
Sigma Pharmaceutical: did a 1-for-3 at $1.02 in September 2009. The institutional shortfall went off at $1.07, giving the institutions that did not subscribe a payment of 5c a share. The retail bookbuild went off at the issue price, leaving nothing for the holders that did not take up their entitlements.
ALE Property Group: entitlement offer in 2009. The $64 million institutional component attracted a 50c premium for non-participants and retail received 41c, but this was unusual because retail could also apply for overs.
Rio Tinto: everyone renounced, institutions and retail on the same terms, although it was slightly different for UK and Australian shareholders.
Lend Lease: launched a 5-for-22 offer at $7.70 in 2010 to raise $806 million. Was most unusual with a combined book build of 28.2m shares which sold at $8.60, given non-participants 90c in compensation.
ALS Ltd: the old Campbell Bros raised $246m at $7.80 a share in 2013. The $112 million institutional component was 92% taken up and non-participants received 95c for their rights. The retail shortfall was 3.89m shares and each attracted a value of 95c in the bookbuild.
ASX Ltd: conducted a $553 million entitlement offer in 2013. Institutions received $3.70 in compensation, whereas retail investors only received $3.40.
Pokies pusher Kevin Andrew takes a comfortable walk in the park in Menzies
The Labor candidate has been so invisible in Menzies that the local paper hasn't even been able to raise him for any comment.
This has given chief Coalition pokies pusher Kevin Andrews a very easy run, as was explained in our August 19 edition. Labor did have a different option, as was revealed by Hillary Bray in The Australian's Strewth column.
Abolishing the national gaming body and creating an advisory group comprising gaming industry types is also a big worry under the incoming Abbott government.
Elsewhere in the pokies debate, the Victorian Coalition government has used the cover of the Federal election to release its proposed voluntary pre-commitment system which is a complete joke.
Former Gaming Minister turned Treasurer Michael O'Brien talked about evidence-based policy when the Victorian model has been shown to fail during 4 different trials.
On the local front, it is good to see the Whittlesea community, which includes part of the marginal Federal seat of McEwen, have grasped the message about pokies.
Signs have been erected and they even have their own impressive web site.
The Whittlesea campaign raises awareness of the problem of poker machine harm with over $93 million lost last year in just one of the 31 councils which cover greater Melbourne. The solution to reduce the harm is the evidence-based reform of a $1 maximum bet so that gambling losses are limited to $120 an hour.
Finally, try watching this 30 second anti-pokies ad featuring our daughter Alice, who was 6 at the time:
A few Federal election thoughts and predictions
I'm coming off the ASA payroll tomorrow in order to be financially at arms length during the AFIC board tilt which will be resolved on October 9. It also should be stressed that any political commentary in this newsletter is completely independent of the ASA. Therefore, the following thoughts are mine and mine alone and future Mayne Report email editions will have less political coverage:
Mirabella defeat would help City of Wangaratta recover
Firstly, it would be great to see Nationals-backed independent Cathy McGowan prevail over Sophie Mirabella in Indi.
Mirabella won the nasty prize from both Tony Windsor and Rob Oakeshott in the last Parliament and her associate Dr Julian Fidge, a former soldier, has been involved in considerable conflict at the City of Wangaratta, which is currently regarded as the most dysfunctional of Victoria's 79 councils.
If Mirabella loses on Saturday, it will improve the prospects of a sensible resolution of the problems at Wangaratta.
Interestingly, it has been Victoria's National Party Local Government minister who has been throwing the book at Wangaratta, even appointing a former HSU official Peter Stephenson as the municipal inspector. However, she's been sitting on his report.
Will the Libs have a majority in their own right without the Nats?
With all this talk about Lib-Nat tensions, it is surprising that the mainstream media is not crunching the numbers on what Tony Abbott needs to do to achieve a house of reps majority in his right.
The Nats will lose considerable leverage if they are unable to threaten to bring on an early election.
Simon Sheikh for ACT Senate
The pro public service Greens have been subjected to a nasty campaign in Canberra.
There is considerable concern in Canberra about Abbott's proposed public service cuts, so much so that Greens ACT Senate candidate Simon Sheikh is firming as a good chance to win the second spot ahead of the Libs. He would be a good addition to the Federal Parliament. Interestingly, Canberra is the only major Australian city where Rupert Murdoch doesn't have a local newspaper. Therefore, The Australian's vicious campaign against Simon Sheikh may yet prove to have failed to prevent his elevation to the Federal Parliament from Monday.
Support the S*x Party in Victoria
Fiona Patten is the best candidate for the Australian Sex Party and received a huge run on ABC TV's Gruen Nation last night. Whilst the Greens will probably win a Victorian quota in their own right, don't rule out the S*x Party in Victoria, especially if the Labor vote comes under severe pressure. Senator Patten would be an interesting and healthy counter to the extremely conservative DLP-style social views held by Tony Abbott. That said, Abbott presented well on Kitchen Cabinet last night as he plays down his DLP history and talks up party consensus.
Clive Palmer's Brick with Eyes will fall short, unlike Xenophon
The Murdoch press have also gone to war with Clive Palmer in an attempt to prevent his lead Queensland Senate candidate, Glenn Lazarus, from winning the final Senate spot in Queensland. I was sympathetic to Palmer as he took on the Murdochs, but his description of ABC reporter Sabra Lane as "you poor woman" on The World Today this afternoon was beyond the pale.
Palmer's Queensland senate candidate man lacks the preference flow to get over the line and will probably end up electing Bob Katter's man, country crooner James Blundell. Coles and Woolies had better watch out if he lands the balance of power.
With Abbott now expected to win comfortably, the game now turns to the Senate. Nick Xenophon is a good chance to win a second spot in South Australia at the expense of Labor's faceless man Don Farrell.
I wouldn't be surprised if the 2nd SA Liberal, Simon Birmingham, also came a cropper at the hands of wealthy Family First candidate Bob Day, who went close in 2010 and has even better preference flows this time. The other outside tip is former West Coast Eagles indigenous player David Wirrpunda in WA. That would be great win for the Nats and the nation as we move towards Indigenous recognition in the Australian constitution during the next term of government.
Firing up our Youtube channel again
When The Mayne Report first launched in 2007 we were posting daily videos on our Youtube channel. Alas, the cost and time of in-house video production, plus the lack of any revenue, made this model unviable. Besides, daily videos wasn't necessarily the best way to campaign for better corporate governance through shareholder activism.
In the end, it made more sense to channel our efforts into appearing on mainstream media video platforms. People watch Q&A, Inside Business and The Project.
However, when you look back at all the video we've got spanning our own productions, one-off interviews, profiles or lengthy interviews such as Nine's Sunday program or ABC TV's Talking Heads, the regular spot on Sky's Business View and webcasts of AGMs, it turns out we've got a rather large library of material, some of which is now available on our Youtube channel.
Some of the playlists on our video site including the following:
11 rounds with Rupert Murdoch
A few rounds with the Millionaires at Macquarie Group
Bye bye Babcock & Brown
The pokies
Gender equity and media trustworthiness in Intelligence Squared debates
Skewering Col Allan on Channel Nine's Sunday program
Melbourne pushing good governance measures through Municipal Association of Victoria
The agenda for next Tuesday's Future Melbourne Committee meeting is expected to go live at 2pm today here.
There's plenty to discuss but councilors should check out Melbourne's proposed motions for the next MAV state council.
We're pushing directly elected mayors, more public questions of councilors, audio of council meetings and more comprehensive minutes of meeting which automatically reflect how individual councilors vote, without the need for calling a division.
Sign up for campaign and governance Tweets
Click on the image above to join almost 18,00 followers on Twitter. We are regularly dropping out observations about journalism, politics, breaking stories, local government and shareholder activism. For example, here are a few Tweets from the past 24 hours about the appearance of Fairfax Media chairman and outed Liberal Party member Roger Corbett on Lateline two nights back:
# The Fairfax board should be meeting to secure Roger Corbett's retirement before this year's AGM. Far too partisan for an "indie" media chair.
# Fairfax's largest shareholder Gina Rinehart will be very pleased with Corbett's Rudd-bashing. She may now spare Roger a 2nd strike on rem.
# After a woeful record over 10 years on Fairfax board, Roger Corbett would probably be voted off at 2013 AGM if his term didn't end next year.
# Roger Corbett has always been a hard man on IR reform. Unleashing IR warrior Michael Stutchbury on The AFR was Corbett's big political move.
# Roger "papers will never die" Corbett and his best buddy Ron Walker (ex Lib bagman) did more damage to Fairfax than Rudd did to the ALP.
# Roger Corbett's extraordinary electoral intervention on Lateline completely cuts across Fairfax Media's "independent" advertising campaign
Labor Senator Doug Cameron is completely wrong to say that Corbett should resign from the RBA board because he's a Liberal Party member.
The bigger question is whether an independent media company should be chaired by a Liberal Party member who makes partisan interventions in the last week of an election campaign. This point is brought into sharp relief when you consider the partisan conduct of News Corp. With more than 80% of Australia's newspapers in the hands of just 2 companies, you need some diversity of views that doesn't appear to be there with Rupert Murdoch and Roger Corbett. That said, Roger has very limited influence over Fairfax editors, whereas Rupert directly calls the tune at News through loyal lieutenants.
From the member edition archive
The Mayne Report goes to more than 17,000 people but if you're a relatively new reader, here are some links to some of the more interesting email editions sent out over the past five years.
2012
Backing Rudd, Lachlan Murdoch, Bob Brown media debate, Manningham governance, Gunns, Darebin, Lend Lease and St Kilda AGM appearance
Monday, February 20, 2012
The OZ goes mad, Murdoch piracy, AFR, pokies double rate, Gina unfit for Ten, council super blowout, BoQ rip-off, power speech and AGM mini-season
Wednesday, April 4, 2012
2011
Murdoch special, media inquiry, pokies, Manningham win, Zara, secretive Shortenite councillors and a Vodafone take-down
Thursday, September 15, 2011
Elected to ASA board, pokies, Rio, Santos, RHG, Hartigan, Manningham, capital raisings and Rich List
Thursday, May 19, 2011
2010
Election wash-up, Mayne Report strategic review, Manningham, Ten, Gina, Falloon for Fairfax, Orica AGM, ABC year-ender, Cornwall, Rich List and then some
Friday, December 17, 2010
Woolies anti-pokies campaign speech, Manningham mayor boxes on, campaigning for women, Bob Brown, pokies forum, HTVs, Rich List and then some
Thursday, November 18, 2010
Paperlinx, Packer, Murdoch, Manningham, pokies, Rich ex wives, foreign takeovers and much more
Saturday, October 23, 2010
DJs, legislate women on boards, ex Lib goes no pokies, preferences, Pratt-Shorten, Labor's debt, AG's report, Manningham council audio and then some
August 3, 2010
Director rankings, Rio, Westfield, New Matilda, MAP, Manningham, Paatsch, state election, Darebin, Moreland, rich list, pokies and much more
June 9, 2010
Political donations, Stokes, Westfield tower, Richard Colless, Manningham nursing home, state debt, Rich List, Grand Prix and more
February 23, 2010
2009
Woolies, Higgins, Manningham, upcoming elections, Fairfax, Centro, Rich List, Rams, Fitzie and much more
December 6, 2009
Seven AGM, crazy Perth visit, Fairfax, Telstra, Transfield, capital raisings and much more
November 9, 2009
News Corp AGM, Packer, Fairfax, James Strong, Woolies, Eastern Golf, Kohler-Gatto and much more
October 20, 2009
Bad Bendigo, Mark Day, Manningham, pokies, NAB, Asciano, Rich List, Paladin, hostile EGMs and much more
September 15, 2009
Macquarie AGM, Melbourne's decline, Asciano EGM, capital raisings, Goyder's pokies, speeches, fire, AGM diary and much more
July 28, 2009
2008
Collingwood AGM, Rizzo survives, ANZ shareholders MIA and Qantas delusions
December 19, 2008
ABC Learning, CBA's Centro brutality, sworn in, pokies, PacBrands and SPP plays
December 10, 2008
After 37 straight defeats, the drought is broken
December 1, 2008
71% backing at Centro, $11bn backing at BHP and huge Qantas protest
November 28, 2008
BHP backflip after $7bn backed our tilt
November 26, 2008
Combank's $700m ABC Learning debacle
November 13, 2008
2007
Fortescue Metals AGM: time for Twiggy and FMG to grow up
Sunday, November 8, 2007, 10.30pm
How $5bn worth of votes backed us against Rupert's dodgy gerrymander
Saturday, 20 October, 2007, 7.20am
Mayne family news
Laura and Alice are at a school camp in town this week and they both came in with their class mates yesterday for a tour of the Melbourne Town Hall.
Laura also broke her arm at camp this week and we spent a few hours at emergency in the Children's on Monday night. However, she's back on camp now and holding up well.
That's all for now.
Do ya best, Stephen Mayne
* The Mayne Report is an email newsletter which seeks to promote transparency and good governance in the corporate, political and media worlds. It is published by Stephen Mayne, the founder of Crikey.com, shareholder advocate and City of Melbourne councilor. To unsubscribe from this email list, click here.