Sparring with the legendary Sir Ron Brierley

We all know that Sir Ron teamed up with Solly Lew and Terry McCrann to launch the mother-of-all campaigns against Coles Myer last year. They lost, Solly was turfed from the board and the Coles Myer share price has since recovered strongly, leaving egg on the faces of McCrann and Lew in particular whilst Sir Ron was damaged by association.

Sir Ron and his offsider Gary Weiss represent 19.9 per cent Premier shareholder GPG on the board. Whilst they are strictly friendly with Solly, they are the only corporates who make money agitating against companies and turning up at AGMs.

Sir Ron put in a lame performance at the Coles Myer AGM last year but yesterday it was time to administer some of his own medicine, especially given his controversial decision to become Solly's apologist in the face of overwhelming institutional opposition to the colourful entrepreneur's re-election.

Sir Ron stepped into the Premier chair to front Solly's campaign last year and it was Premier that borrowed more money to buy an additional 12.5 million shares on market for $69 million or $6.32 a pop. Solly was more tight-fisted and foolishly rented some more shares when he'd be $50 million better off today if he'd put some real money on the table.

This leaves Premier as the largest Coles Myer shareholder with 5.9 per cent and we wanted to know yesterday why they didn't buy even more shares when the stock was around $6. Sir Ron said they didn't rent any and got a few laughs saying "it was very nice of you to tell us what the share price was a year later".

Premier is 51 per cent owned by Solly. He hasn't sat on the board for a few years but it is still stacked full of 5 cronies with not a single independent to be seen anywhere. They all wandered across from Solly's office at 101 Collins Street to attend the AGM at St Michaels church at 120 Collins St yesterday afternoon.

The key point we made was that Premier shares trade at a huge discount to its asset backing and this reflects poorly on the board, structure and major shareholders. Seeing as they only seem to subtract value, surely the board should liquidate the two assets and give the cash back to shareholders.

The numbers are quite powerful and these are the figures we quoted at the meeting: Premier's 69.5 million Coles Myer shares are worth $532 million based on the current price of $7.66 and its 26.9 million Housewares International shares are worth $68.6 million based on a price of $2.55.

Add in the $26 million in cash and you have total assets of $626 million. Take away the $250 million margin loan to the ANZ Bank and Premier has net assets of $376 million.

But Premier is only trading at $3.20 and with 90.2 million shares on issue, that values the company at just $289 million when the net assets are worth $4.16 a share.

Sir Ron was defiant when presented with the facts that he headed a company that was trading at an alarming 23 per cent discount to its net asset backing.

The Premier board has a well-earned reputation for making bad calls. Back in 1999 when Coles Myer shares cracked $9, they decided to hang onto their holding just as Solly was pocketing more than $700 million quitting his personally held stake for $8.38 a share.

It was around this time that Premier decided to sell 80 per cent of Housewares International at $1 a pop in a float. Crikey lambasted the board for these blunders pointing out that selling Coles Myer and keeping Housewares (now up at $2.55) would have left Premier shareholders almost $200 million better off.

Sir Ron responded as follows: "I don't think this board has made any blunders at all."

And on the discount he claimed: "There will always be a discount, that is invariably a characteristic of investment companies."

Sir Ron has laid down a challenge here, folks. Let's try to fund other investment companies trading at a 23 per cent discount to their NTA. It won't be easy as Premier trades at a big discount because investors don't like the shareholders, governance or structure.

We also asked whether Premier was caught up in the Coles Myer AGM fiasco where Solly failed to vote his proxies. Sir Ron dismissed this as "media nonsense" and insisted that he personally voted the Premier shares.

And how much cash did Premier put into Solly's extravagant $10 million re-election campaign? Ron curled his finger into the shape of a zero and declared "not one cent".

We're sending this edition before seeing today's papers but suspect the main news they'll derive from the meeting will be Sir Ron's reflection that Premier will probably vote against the John Fletcher options at the upcoming Coles Myer AGM.

This followed a Crikey Dorothy Dixer suggesting that executive pay is way over the top at Coles Myer and Fletcher does not need the extra options.

"That is what we were saying a year ago," Sir Ron said. "Remuneration was far too high at Coles Myer."

"It would be my expectation that we would be voting against those options. John Fletcher has a 5 year contract and there is absolutely no reason to unilaterally change that."

Sir Ron saved his biggest gaffe to last with an attack on all independent directors as he only wants directors with a professional interest in the company.

You see, Premier completely ignored the new ASX Corporate Governance guidelines which suggests companies adopt an "if not, why not" approach in the annual report if there is not a majority of independent directors.

"Finding an independent director would be doing a disservice to the company," Ron spluttered. "So long as I am chairman there will be no nonsense statements in our annual report about independent directors."

On hearing this ridiculous Sir Ron explanation, Crikey finished the meeting with the strongest spray we've launched at an AGM in a couple of years. Doesn't Sir Ron realise that the appalling corporate governance and board structure at Premier contributes to the huge trading discount and that a decent independent director would do something about it. Instead, we've got a board full of Solly patsies who are not acting in the best interests of all shareholders.

For the record, the Premier board comprises Solly's best mate and third largest shareholder Lindsay Fox, his staff member and former Crean advisor Michael McLeod, the two reps from the second largest shareholder GPG (Sir Ron and Garry Weiss) and Solly's personal accountant Frank Jones. Crikey invited Michael McLeod to speak on behalf of Solly but he declined.

Copyright © 2022 The Mayne Report. All rights reserved

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