GPT, market chaos, AGMs everywhere and breakfast with Carl Icahn

February 2, 2010

Dear Mayne Reporters,

Sorry for the second update today but there's just too much happening.

First up, listen to AWB chairman Brendan Stewart break down in tears at the end of yesterday's historic EGM ushering in a new era of good corporate governance at the company.

The bailout of GPT

The emergency $1.6 billion raising by GPT with the Singapore Government underwriting the bailout on punitive terms is arguably the most dramatic development we've seen yet in corporate Australia since the sub-prime market first imploded.

Rams, MFS, Valad Property Group and even Babcock & Brown were relative newcomers to the public company space in Australia, but GPT is an absolute luminary dating back to the early 1970s when it was spun out of Lend Lease.

Chairman Peter Joseph set up a meeting at the RACV Club after that video and CEO Nic Lyons also came along. It was a strange pitch because the line was that everything was fine but that very day advisers had been appointed to flog the $700 million tourism portfolio.

Rather than trying to sell volatile tourism assets, GPT clearly should have raised equity earlier this year and also sold off a couple of their trophy office towers.

Instead, they dithered and sold nothing, meaning the terms today are even more punitive.

Directors across the country will be looking at this GPT statement and asking whether they'll have to do the same. For instance, Asciano shares fell 19c or 7% to $2.56 today. With $5 billion in debt, Asciano really should have raised truckloads of equity earlier this year.

As the Asciano boys were told yesterday, the time to raise equity was before Lehman Brothers died.

The likes of Westfield and even Iluka Resources are now to be congratulated for sniffing the breeze as both could have been in significant trouble had they not built an equity buffer with what were considered unpopular raisings at the time.

The Amcor AGM today was a strong example of the way ahead. Chairman Chris Roberts called up the finance director to give a very detailed explanation of the company's debt profile and then she literally took the stand and answered a succession of questions very competently.

Whilst Amcor's $2.5 billion is a touch high, its cash flow covers the interest bill six times over and it is getting big benefits from the beaten up Aussie dollar.

That said, even Amcor isn't in a position to go buying "diamonds in the rubble" as the impressive chairman Chris Roberts put it today.

If Amcor had a far stronger balance sheet and hadn't splurged $350 million on what now looks like an ill-considered buy back over the past 12 month, it could easily start mopping up distressed companies such as Paperlinx and Gunns, or even have a crack at the Alcan packaging assets which Rio Tinto is struggling to sell after paying a ridiculous $43 billion for the whole business.

BHP Billiton AGM tonight

The London BHP-Billiton AGM is on tonight so British-registered shareholders will get to vote on the board tilt, which is based around opposition to the Rio Tinto tilt. Who'd want to take on all that debt in this market? We'll let you know how it goes, although we probably won't see any figures until the Australian AGM on November 27.

The Tabcorp chairman's commitment on kids in venues

Paul Bendat's website is really excited after today's Tabcorp AGM where CEO Elmer Funkie Kupper (sic) said the following in response to this opening contribution on responsible gaming practices: "On kids in venues, it's hard to disagree with your basis point."

That's pretty straight. Tabcorp will presumably ban them in the coming weeks.

Woolworths would be shocked by such a development as its business partner Bruce Mathieson actively targets families with children's entertainment and "kids eat free" offers.

Why Reece should be a private company

Reece Australia is a great story. The plumbling supplies group got into trouble during the 1991 recession when it mainly operated only in Victoria.

What should have been a cheerful AGM celebrating a great success turned into a bit of bunfight when executive chairman Alan Wilson, who has run the company since 1974, turned on a particularly belligerent performance.

Asked if Reece planned to move to a more conventional model with a non-executive chairman he just said "no" and then Ron Pitcher launched into a big attack on corporate governance box tickers. This was a bit rich coming from the founder of Pitcher Partners, which audits Reece.

When the next director was up for re-election, chairman Wilson tried to force me to sit down saying that I'd already had my two question. This was 14 minutes into the AGM.

Subsequent contributions on issues such as executive pay and even corporate expansion were either ignored or dealt with curtly by the chairman although his son and managing director was much better during the meeting and came up for a friendly chat afterwards.

A big day in Sydney tomorrow on activist funds and AGMs

Whilst three AGMs today was busy, tomorrow we're aiming for four in Sydney.

The day starts with a breakfast put on by a law firm to discuss activist funds.

I'm one of three people on the panel in Sydney but the highlight will be legendary billionaire activist Carl Icahn ringing in from New York.

Icahn is worth about $20 billion and rated the 46th richest bloke in the world, but he's made most of that practising the sort of activism that is so badly needed in Australia.

Two of his most notable recent campaigns have been against the Yahoo! board for rejecting that Microsoft offer and shaking up the Motorola board.

There are rich AGM pickings in Sydney tomorrow and the schedule is as follows:

10am: Amalgamated Holdings at the State Theatre with Rich Lister Allan Rydge in the frame.

10.30am: Boral at the City Recital Hall with the big Rod Pearce pay packet expected to cop some flak.

Noon: EGM for Everest Babcock & Brown Infrasrtucture Trust just two days after ANZ seized a stake held by Rich Lister Stephen Eckowitz.

2pm: Energy World which has James Packer on the register with close to 10%

2.30pm: Wattyl.

There's a 7.30pm plane to catch, so 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.