Round 10 with James Packer, BBI, Allco and ABC Learning

February 2, 2010

Dear Mayne Reporters,

After three engagements with James Packer in 9 days, Australia's richest man must almost be approaching Rupert Murdoch as the only person to have gone 10 rounds of interrogation with The Mayne Report since we first ventured into shareholder activism way back in October 1998.

And James Packer looks like today passing Rupert Murdoch on another far more important measure - wealth.

News Corp shares tanked 23% this afternoon to a multi-year low of $12.50 after a very disappointing 30% plunge in September quarter profit.

The Murdoch family stake shrunk by more than $1 billion to less than $4 billion which means The Sun King can no longer claim to be richer than either James Packer or Frank Lowy.

That said, things didn't go all James Packer's way either today given Seek shares plunged 10% to $3.49 after the tumbling dollar meant its big investment in loss-making Chinese jobs site Zhaopin will lead to the first decline in net profit in 2008-09 since the float four years ago.

Another shy performance from James Packer

James Packer wasn't looking like someone who had just regrabbed the "wealthiest Australian" title at the Seek AGM today although most of the exchanges were polite and good-natured.

He ducked out before any scarey shareholders could engage in conversation after the meeting and there wasn't even a chairman's address. Press photographers were also kept a long way from the actual meeting, hoping to instead catch a picture of James walking the 300 metres back to his beloved Crown Casino from The Langham Hotel at Melbourne's Southgate.

As usual, James also declined to get with the program and webcast the Seek AGM, but we'll have our bootlegged audio to you in the next edition.

When asked to explain the proposed distribution of CMH's 24% stake in Seek to the CMH shareholders as part of the aborted Lachlan Murdoch privatisation bid last financial year, James noted that it would have left him with the same effective personal stake of about 10% in Seek. However, he declined to comment on whether this structure was proposed to avoid a conflict of interest given that News Corp is one of Seek's two biggest competitors in the Australian online jobs market.

James did stress that he remained committed to Seek for the longer term and heaped the usual praise on the management team, led by brothers Paul and Andrew Bassat, during the 42-minute meeting which only included one other very brief contribution from another shareholder about a typo in the annual report.

The over-achieving Bassat boys

These two lads really are joined at the hip. For 10 years they have been "joint chief executives". Both sold down 2 million of their 14.6 million Seek shares during the year and both were issued with 1.045 million options today.

However, the formula broke down on the pay packets. Paul clearly works a fraction harder as his long service entitlement came in $851 higher so there was a similar tiny difference in the 980k packages that the boys took home in 2007-08.

The Bassat boys are good mates with my old school captain so it is fun to hit them with a few questions and then hear feedback via the school network down the road.

Today they were asked whether they could ever envisage not working full-time for Seek and to explain how they were getting along and split up the role.

We got the predictable response about all being happy in the world and James Packer joked that fellow Seek founder Matthew Rockman, who bailed out last year, was looking "very relaxed in the front row".

The Bassats have been progressively selling Seek shares but are now being issued options to potentially increase their stakes again. Couldn't they "do a James Packer" and donate their services for free? James said it was important to try and lock the Bassats in for the future, which is fair enough.

They really have done a fantastic job cutting Fairfax's classifieds lunch over the years and even this remarkable push into the online education market is now throwing off revenues of $100 million and annual profits of about $20 million.

As the one curve-ball for the day, I asked whether the Bassats would consider making some sort of philanthropic contribution to journalism given they'd become rich beyond their wildest dream from a business model that had done so much damage to the profession.

One of them replied that he wasn't sure how to respond. So they didn't.

Putting Toll rorter on the spot at Seek

Recently retired Toll Holdings finance director Neil Chatfield was up for re-election at the Seek AGM today, so I took the opportunity to "inject the only discordant note into proceedings" by arguing shareholders should vote against him as punishment for the outrageous rort that was the $55 mllion executive heist as part of last year's demerger with Asciano. Go here if you need to be reminded on the scandalous details.

Chatfield declined to buy in but James Packer provided the usual "chairman's defence", saying he'd contributed very well at Seek whilst declaring he didn't know the details of what happened at Toll.

There were about 50 largely pro-Seek people in the room so letting them all know about "the Toll heist" just serves to embarrass the culprit so he'll think twice before doing it again.

After all, this bloke is now supposed to be defending our interests against executive excess at Seek, not that there are any problems given that the remuneration report passed today with 95% in favour and the options for the boys was closer to 98%. Check out the full proxies here.

Babcock and Allco wash-up

The hard-hitting Babcock & Brown Infrastructure AGM attracted a lit bit of media today, although it appears there were only two journalists who listened to the entire three hour affair.

The SMH's Scott Rochford cottoned onto the outrageous $40 million fee for Babcock on that $400 million US gas pipeline investment by BBI and Tony Boyd did something very unusual on Business Spectator by actually producing a detailed account of the AGM, including an assessment of the chairman's performance.

Whilst former Queensland Treasurer Dr David Hamill did reasonably well from a procedural point of view, he did defer an awful lot to the finance director and at the end of the day he was one of the independent directors who approved the ridiculous top of the cycle acquisition binge last year. For this, he should be held to account because we all know Babcock & Brown had the perverse incentive of maximising dead flow regardless of debt worries. Dr Hamill should have knocked back most of last year's deals.

Lateline Business also did this story which took in the Allco Equity Partners AGM and included our contribution that the vehicle should be liquidated given that it trades at a 70% discount to claimed net assets.

ABC Learning joins Allco and how to get on the credit committee

ABC Learning today officially joined Allco Finance Group in the hands of its banks, which raises an interesting question. How can a shareholder activist get on the creditors' committee?

In the case of ABC and Allco, I'm an investor in the listed debt or hybrid securities which rank ahead of ordinary shareholders and presumably will be represented on the creditors' committee.

If anyone has an idea how to go about that, drop us a line to

Maybe this is a question to raise at the AGM of listed litigation funder IMF Australia which I'll probably be attending at 9am in Sydney tomorrow ahead of the bigger Babcock & Brown Power affair later in the day.

We'll have more for you on these two meetings tomorrow.

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.