Incitec Pivot EGM, Gunns, Fairfax board and WA News

February 2, 2010

Dear Mayne Reporters,

amidst all the action with John McCain's acceptance speech, the rolling of Morris Iemma and the backsliding of Ross Garnaut, shareholders in fertiliser giant Incitec Pivot gathered in Melbourne today for an EGM.

The 20 for 1 share split was waved through, so the stock that hit $200 earlier this year will soon be worth about $6.60, given that it closed tonight at $133.12.

Former Democrats leader Lynn Allison turned up but was rebuffed by farmer-turned-chairman Alan Watson who ruled her questions about the company's phosphate imports from Morocco-occupied Western Sahara out of order. The same issue was raised at the AGM last December and Watson said after today's meeting he would be happy for Allison to come and see him for a private meeting.

Western Sahara in very similar to East Timor. It has been illegally occupied by Morocco since 1975, after the French pulled out, and Allison contends the phosphate exports to Incitec Pivot are illegal.

It was good to see another former pollie at a shareholders meeting, following on from Chris Schacht's half dozen of so appearances over the last few years.

Allison has been true to herself and hasn't taken a paid gig since being defeated, but instead she sits unpaid on six not-for-profit boards spanning her areas of interest such as mental health, Vision Australia, family planning and the like. If only other former pollies regarded their pension payments as an ongoing salary to continue serving the public for no additional payment.

The only reason I turned up today was to ask why the 72-year-old former Centro chairman Brian Healey was still hanging around like a bad smell on the Incitec Pivot board?

This was Healey's first public appearance in 2008 as he failed to front any Centro events after last December's implosion and also didn't turn up at the Incitec Pivot AGM when I gave this little speech encouraging a low key but speedy retirement to avoid any further embarrassment.

Alas, 9 months on and the bloke who smoked $5 billion at Centro is still on the Incitec-Pivot board. Watson made some comments about Incitec Pivot's "getting it done culture" but he wasn't taking questions that weren't on the specific resolutions so I had to slip a very quick sledge of Healey into the mix and request that he "get it done", Healey's resignation, before next year's AGM when the outcome of a board review will be known.

Corporate Australia has a terrible culture of not forcing those that destroy billions out of the directors' club. Healey is the latest glaring example, although Justin Gardiner, former chairman of the HIH Insurance audit committee, still sits on the Hutchison board.

John Green takes a stand – put that man on the Fairfax board

When Geoffrey Cousins took on the Gunns pulp mill, it was a rare example of a prominent business figure taking on a major public company.

Whilst not nearly as dramatic, former Macquarie Banker John Green took up a similar theme this week when he stepped in to replace Fairfax's ditched sponsorship of The Walkleys and then strongly criticised the company's attitude.

Green is not short of a quid. He made a pile working for the Millionaires Factory and as a director of booming engineering services company Worley Parsons, he owns 942,851 shares worth $32.83 million based on last night's closing price.

Whilst the money is insignificant, the sentiment is to be applauded and, most importantly, Green is pushing hard for Fairfax to reverse the decision.

He has written directly to Fairfax chairman Ron Walker and has encouraged others to do likewise. The anti-journalist and anti-union approach of Fairfax is certainly reminiscent of Walker's great mate Jeff Kennett.

As an occasional columnist in The AFR, Green rather boldly submitted an opinion piece on the issue.

In this interview with Deborah Cameron on 702 ABC Sydney yesterday, Green revealed it was rejected by The AFR, so he then offered it to The SMH. When the broadsheet came back and offered to run half of it as a letter, Green withdrew it.

I contacted Green after hearing his interview on The World Today yesterday and he agreed to send the rejected Fairfax op-ed piece through. Check it out here. Sadly, none of this has been reported by Fairfax yet.

Whilst Green rejected a suggestion to stand for the Fairfax Media board at the AGM in Melbourne on November 13, board composition is an issue gaining currency in media circles.

The Fairfax board is quite within its rights to push for efficiency gains. However, the cuts announcement and PR has been appallingly handled. Brian McCarthy should replace David Kirk as CEO, but the board needs to contain his brutish tendencies.

The journalists over-reacted by going on strike for three days without a more specific log of claims, but the company's approach to the Walkleys sponsorship and the sacking of Mike Carlton was over-the-top.

If Carlton still worked for the independent Southern Cross Broadcasting, it's unlikely he would have been sacked because Fairfax would have bought themselves on-going attacks from 2UE and Carlton's column would simply have been picked up by The Australian or The Daily Telegraph.

Instead, as a Fairfax radio employee courtesy of John Howard's deregulation of media ownership laws, Carlton has to be careful.

Then again, as a multi-millionaire in his 60s, why not go out in a blaze of glory? Mike Carlton should run for the Fairfax board and lead a push to turf chairman Ron Walker. Nominations close in a couple of weeks. I'm going to try and encourage a couple of media luminaries to give it a go and strongly believe that someone like former Woolworths CEO Roger Corbett should not sit on the Fairfax board given that Woolies is a huge advertiser.

The cultures of high volume grocery retailing and high quality journalism are world's apart yet Fairfax seems to be treating journalists like workers on a production line.

It was also interesting to see a David Jones sticker advertisement on the front page of The Age in one of the strike editions and that strike-breaking workers were given a $200 David Jones voucher as a reward. Given that David Jones chairman Bob Savage is a director of Fairfax, this shouldn't have come as a surprise.

Gunns tanks but will John Gay really write a cheque for $13m?

After one of the longest suspensions we've seen for a mere capital raising, tree-lopper giant Gunns unveiled a net $322 million raising from institutional investors yesterday but existing shareholders promptly saw another $112 million of value disappear when the stock tumbled 27.5c to a six year low of $1.40.

And with Gunns shares hitting a low of $1.275 this morning, the investors who shelled out $1.50 a pop for 224 million new shares were at one stage more than $40 million under water. And they don't qualify for the upcoming 4c dividend payout.

Gunns finished steady for the day at $1.40 and is now capitalised at $880 million, but it will struggle to raise much of the additional $91 million from retail investors at $1.50, given it is now 14c out of the money.

Except, of course, for bull-headed executive chairman John Gay who made a selective disclosure to Business Spectator's Robert Gottliebsen last night, revealing that he'd taken up 500,000 shares in the placement and will take up his full entitlement in the 7-for-10 retail offer.

Gay owns 18.75 million Gunns shares so he's already spent $750,000 and has now pledged through Gottie to shell out an additional $13.12 million for shares at a $1.50. Gee, the bloke who recklessly imperilled the company's finances sounds like a commercial lunatic when it comes to his own dealings.

Launceston car dealer and fellow Gunns director Richard Millar has a big decision to make as well given he already owns 7.056 million shares. Will he bravely write out a cheque for $7.4 million to take up his entitlement?

The original capital raising announcement talked about a $130 million retail component but yesterday this had been cut to a maximum of $91 million. Have the directors already bailed out?

The statement from Gunns yesterday also claimed that “over 93% of the new shares offered under the Institutional Entitlement Offer being taken up by existing institutional shareholders.”

So if it was just a case of rounding up the existing shareholders, why did it take so long and why did underwriters Credit Suisse, JP Morgan and Macquarie gouge an exorbitant 4% fee or $12 million? Maybe Sue Cato, the latest through the Gunns revolving door for spindoctors, can help out on that one?

It will be very interesting to see exactly how many shares the major players such as Perpetual, Concord Capital, Schroders and Capital Group have actually bought.

Way back on August 21, Gunns requested a trading halt whilst promising to produce a capital raising announcement in the week beginning Monday, August 25.

The emergency raising announcement and suspension ended a 30% plunge in the stock price from $2.40 to $1.675 after this profit warning was announced on August 15.

And yesterday we got these restated financial accounts. What a mess. The best news for Gunns today was that it wasn't included in this major culling exercise of the ASX indices by Standard & Poors.

Finally, have listen to this spray at John Gay from the 2007 Gunns AGM.

What's happening at WA News?

Whilst all eyes will be on the West Australian election result tomorrow night, observers once again reckon the state's monopoly newspaper, The West Australian, has been biased against the Labor Government in its coverage.

Premier Alan Carpenter has waged a big campaign against editor Paul Armstrong, but if he is defeated tomorrow night, Labor types will no doubt blame the WA News board for failing to rein in the nation's most erratic and right wing editor.

However, something might be afoot at the company because the annual report was released this week, along with this notification about the November 5 AGM.

Alas, it only advised the date. This would suggest there may be some sort of "issue" involving the notice of meeting. Is Kerry Stokes standing for election again? Has the Seven Network put up a resolution proposing to remove the board's constitutional ability to limit the number of vacancies in contested elections?

I reckon something is afoot here, but for now, all eyes will be on tomorrow's state election and Paul Armstrong might yet preside over the coverage of Alan Carpenter's defeat, something he will have contributed to in no small way.

That's all for now.

Do ya best, Stephen Mayne

* The Mayne Report is a multi-media governance website published by Stephen Mayne with occasional email editions. To unsubscribe from the emails click here.