Fairfax, RACV elections, MAP, capital raisings, Manningham, Wallis, hostile EGMs, video, AGM diary, rich list and much more

March 23, 2010

Dear Mayne Reporters,

First up this week we've produced a lively new video exploring the connection between politicians and journalists, featuring everyone from Malcolm Turnbull to Peter Costello and even Jeff Kennett. Call us nostalgic, but we were reflecting on last Friday's 10th anniversary of Jeff's shock electoral hit. This video is one of our better efforts so click on the screen grab below, or just go to our video page to check out this and other videos.

More candidates emerge for Fairfax board

There's been several forests culled already commenting on the Fairfax Media board fight in what really should be a fairly straight forward issue about chair succession managment. Here are the links to what some of the key players have been saying:

John B Fairfax launches boardroom blitzkrieg
Matthew Stevens, The Australian, ‎September 17, 2009

Battle lines drawn at Fairfax
Stephen Bartholomeusz, Business Spectator, September 18

Fairfax attack destabilising
John Durie, The Australian, September 18

Corbett favourite to take Fairfax chair
Clive Mathieson, The Australian, September 21

Support builds for Fairfax board spill
Peter Ryan, The World Today, September 18, 2009

John Durie was particularly unkind to John B Fairfax last week and the most amazing comments came from the Murdoch man on the Fairfax board, David Evans, who was quoted in The Age last Friday blasting the Fairfax family's margin loans. Surely people like Evans know that all media stocks were pummelled over the past year and to suggest Marinya Media's margin loan took $2 off the Fairfax share price is just ludicrous. We haven't heard something as far-fetched as this since Eddie Groves claimed ABC Learning was destroyed by short sellers.

Whilst the Fairfax family and deputy chairman Roger Corbett have been sending more conciliatory messages to each other, it is hard to see how David Evans could ever work constructively with the Fairfaxes.

Besides, Evans has the huge conflict of interest in being a director of Fairfax Media, Village Roadshow and BSkyB at the same time, as was explained in this Crikey piece last month.

Meanwhile, Crikey has today revealed that Gerard Noonan has nominated for the Fairfax Media board. Gerard's decision to use Crikey to launch his campaign was an interesting one given its known antagonism to Fairfax. Gerard is a good hand and a former editor of The AFR but he will viewed as the "union candidate".

I'd also nominated for the board before last week's blow up and actually had lunch with Fairfax Media chairman Ron Walker on Thursday, finishing up just 90 minutes before John B Fairfax released his explosive statement.

Nominations close at 5pm today and whilst mine is in, the platform is still to be submitted this afternoon.

I was hoping to be able to run a wholly positive campaign but it seems the board will be invoking the old "no vacancy tactic". This means outside candidates have to campaign against incumbents because a 50% vote in favour is not good enough. Unfortunately, this tactic has been used in the majority of my 35 board tilts over the years and it has made it statistically impossible for the challenger to get elected because incumbents average 96% in favour and usually have about 10% voted in their favour by the chairman as undirected proxies.

It would be a shame if a great media company like Fairfax, which demands best practice democracy of politicians through its various media outlets, would stoop to such a tactic when the proxy advisers and institutions believe it is wrong. Indeed, the likes of Telstra, NAB, Woolworths and even News Corp have not employed this tactic on occasions in the past.

Board size is a matter for shareholders. If the various institutions or the Fairfax family want to expand the Fairfax Media board from 8 to 10 then they should be able to do it at the AGM on November 10.

Big corporate governance speech in Canberra

Wednesday September 30 is going to be a big day. We're on an early flight to Sydney for the ASX AGM at 10.30am which will be followed by what will be a highly contentious EGM at Macquarie Airports starting at 2pm.

Macquarie Group is attempting to extract an outrageous $345 million go away fee and MAP chairman Max Moore-Wilton, the highly conflicted former head of PM&C under John Howard, will be in a very difficult position defending this highway robbery.

Meanwhile, AFL President Mike Fitzpatrick has come in with his own proposed alternative fee-gouging management arrangement and MAP shareholders should probably reject them all and instead pursue a demerger of Sydney Airport which should be internally managed.

We'll only be able to stay for the first hour of proceedings at MAP because there is a big corporate governance lecture to be delivered that night at the University of Canberra. The details are available here and please feel free to come along if you live in the ACT.

Vote for Trevor O'Hoy and Paula Piccinini in RACV election

Australia's biggest and most successful remaining mutual, Victoria's RACV, is having its annual board elections and my better half, Paula Piccinini, is one of the incumbents.

Paula has teamed up with former Foster's CEO Trevor O'Hoy to produce this flyer spelling out their credentials and some joint policies.

More than one million ballots will be arriving in letter boxes throughout Victoria this week, along with the September issue of Royal Auto.

If you're a member, don't forget to vote because turn out rates in RACV roadside assistance elections are traditionally less than 10%.

AGM season kicks off this Thursday

The 2009 AGM season kicks off on Thursday with the Mirrabooka gathering at the Hilton Hotel in Melbourne. The stable of listed investment companies controlled by former JB Were chairman Bruce Teele are usually first cab off the rank with ASX itself not far behind.

We're putting together this comprehensive diary for the AGM season so check it out and send in any corrections or additions to stephen@maynereport.com.

We're naturally in the market for proxies. For instance, if anyone is going to be in New York on October 16 we'd love to appoint you our proxy for the News Corp AGM.

Stan Wallis quits AFIC but clings to last board seat

After banging on for a couple of years to have former AMP and Coles Myer chairman Stan Wallis removed as a director of AFIC, Australia's largest listed investment company, it was good to see all parties finally obliged in June. The resignation announcement slipped below the radar at the time but chairman Bruce Teele quite rightly pointed out that Stan's record at AFIC was pretty good over a 22 year period.

If only AMP and Coles Myer shareholders had enjoyed such excellent returns. Teele protected and defended the Wallis record at AFIC AGMs as is recorded below:

AFIC AGM: September 29, 2008 - see package of highlights

AFIC AGM: October 2, 2007: see package of highlights.

Last year's AFIC AGM was told that if Wallis didn't retire an EGM would be called to seek his removal, as The Age reported at the time. However, the man who was too ashamed to accept his $1.6 million retirement allowance from AMP or even turn up when he was last elected an AFIC director in 2007, is still hanging around on one last public company board.

Yes, AFIC's stablemate AMCIL is having its AGM next Monday and whilst Stan Wallis isn't up for re-election, he is a director and it will be interesting to see if Bruce Teele protects him as usual.

Who can forget the way Teele previously claimed Wallis "did more to turn around AMP than anyone will ever know". That's one of the most outlandish statements ever made at an Australian AGM given that Wallis was a pivotal director all the way through AMP's disastrous UK acquisitions in the 1990s.

Amazing AGM scheduling cynicism from Amcor and Paperlinx

One of the last things Stan Wall did as chairman of Amcor was demerging its paper business Paperlinx. Sadly for shareholders, this experience has not been a happy one because Paperlinx almost went broke earlier this year and ended up doing a $600 million fire sale of its Australian Paper business to Nippon Paper before declaring a loss of almost $900 million.

Shareholders are rightly angry and looking forward to quizing the board but they won't be able to do that if they also want to ask Amcor's directors a few questions.

Believe it or not, but despite having very similar share registers, Amcor and Paperlinx have scheduled for their AGMs to clash on Thursday October 22, with Amcor's starting at 11am at The Park Hyatt whilst the Paperlinx version is down the other end of town at Jeff's Shed, starting at 10.30am.

Given that Amcor revealed its AGM details first and has largely rebuilt its board and management team from the Stan Wallis days, I suspect this ruse was pulled by the Paperlinx chairman David Meiklejohn, who was Stan's long time finance director at Amcor.

What's wrong with a little bit of AGM accountability? These duck and weave tactics are quite outrageous.

More hostile EGMs

Last week's edition led with the story about the unprecedented number of hostile extraordinary general meetings being called at ASX-listed companies.

That was before we knew about the battle for control of Melbourne-based Traffic Technologies which has been added to this master list of corporate actions as follows:

Traffic Technologies: Ken Baxter, Andrew Harris and Con Scrinis have called an EGM for October 27, 2009, to nominate themselves to the board and remove former Smorgon Steel CEO Ray Horsburgh, Con Liasatos and Alan Brown.

Who would have thought we would see Jeff Kennett's former departmental secretary Ken Baxter involved in a proxy fight to sack Jeff Kennett's great rival, the former transport minister Alan Brown?

The other hostile EGM coming up is at MacArthur Cook Industrial Property Fund. Check out the detailed counter-attack launched by the incumbents yesterday ahead of the unitholder vote on Thursday morning at the Sofitel in Melbourne, starting at 10am.

Woolworths is shaping up an another company likely to face some corporate action at its coming AGM on November 26 as it refuses to take meaningful steps to improve practices across its 12,000-strong pokies division. Check out Paul Bendat's excellent pokieact.org website for all the details.

Another donation received at The Mayne Report

Earlier this month we received our first donation since ditching paid subscriptions in June and last week we received our second. It was $25, but keep them rolling in and The Mayne Report will remain free. If anyone else wishes to help fund our activism and this free service, try clicking here.

We've dropped about $200,000 on The Mayne Report over the past two years but everything has turned around since February this year when we resolved to move to a free model and then stumbled upon the strategy of focusing on capital raising plays to pay the bills.

The gross gains from these plays this year now exceeds $230,000 after a bumper run (see below) although when you combine that with more than $100,000 of crystallised capital losses putting together the world's biggest small share portfolio, we're still facing a net loss from the whole exercise.

However, the capital raisings are showing no signs of slowing down and if it keeps producing gains of more than $5000 a week The Mayne Report will be able to continue as a free service into the future.

Development challenges at Manningham

The City of Manningham has been chosen by the Victorian government as the first council for which a dedicated Activity Centre Zone will be implemented to provide more certainty and facilitate development at Doncaster Hill.

As one of six new councillors elected last November, the issue of high rise development on Doncaster Hill has not been easy. Westfield had a 10-storey apartment building rejected unanimously by all councillors and the planning officers but another 10-storey proposal on Tram Rd was supported by the officers and approved by councillors 5-4. Listen to some of the arguments here: Supporting a 10-storey development on Doncaster Hill

Meanwhile, the state and federal government have come up with an interesting post-script to this debate by proposing a 10-storey public housing development on the adjacent Tram Rd site. Check out the coverage of that issue in the local paper.

Finallly on Manningham, all the edited audio highlights from recent public council meetings are available here.

Telstra rip-offs and Cornwall

Telecommunications Minister Stephen Conroy has over-played his hand with the thuggish approach to structural separation at Telstra. The Minister has treated the board like it was still being led by Donald McGauchie and Sol Trujillo. There has been little recognition for the more conciliatory approach adopted by new chair Catherine Livingstone and CEO David Thodey.

Whilst Phil Burgess swings away, the new board is adopting a small target approach and letting the likes of business commentators and the Australian Shareholders' Association make the running. However, they will need to have a firm position developed by the time the AGM comes around on November 4 in Sydney, the day after the Melbourne Cup.

Updated lists - everyone ASIC has jailed

Is ASIC an effective corporate cop ready to take over market supervision from the ASX? You be the judge after reading this list of the 347 people the plod has sent to jail since it was established in January 1991. Here is our latest entry:

11 September 2009 - Mr Gerard Little, of Castlecrag, New South Wales, failed to ensure his self-managed superannuation fund known as the Little Superannuation Fund, was maintained in accordance with the sole purpose test. He was sentenced to two years imprisonment, to be released after eight months, for unlawfully allowing the early access of superannuation benefits. Mr Little's release is conditional upon entering a $1,000 security to be of good behaviour for a period of three years.

Gee whiz, the corporate plod really is locking up the big boys with prosecutions of self-funded retirees for not observing the sole purpose test. What about some of the turkeys who helped destroy almost $20 billion at Babcock & Brown, MFS, Allco and ABC Learning?

Tracking the federal government's borrowing binge

This list tracks all bond and treasury note issues by the Rudd Government since it was elected in November 2007. There has now been more than $40 billion raised since the second stimulus package was unveiled on February 3 this year. Here are the last few offers:

Friday, September 18, 2009: $700m tender of 3 year bonds expiring in April 2012 were sold for an average yield of 4.6% and was 3.5 times over-subscribed.

Wednesday, September 16, 2009: $500m tender of 8 year bonds expiring in February 2017 were sold for an average yield of 5.2% and was 2.9 times over-subscribed.

Wednesday, September 9, 2009: $500m tender of 6 year bonds expiring in April 2015 were sold for an average yield of 5.3% and was 2.6 times over-subscribed.

Friday, September 4, 2009: $700m tender of 5 year bonds expiring in June 2014 were sold for an average yield of 5.2% and was 2.9 times over-subscribed.

Borrowing more than $1 billion a week is clearly unsustainable over time and it is interesting that longer term borrowing costs have blown out to above 5% when the forward estimates in the budget are only 4%.

Other budget predictions - such as assuming the Afghanistan deployment finishes on June 30 next year - are also clearly way off the mark so the budget next May will be the toughest faced by any Federal Government since Peter Costello's opening offering in 1996. If I was Kevin Rudd, you'd be sprinting to the polls on any available double dissolution trigger to get that coming second term landslide in the bag before the tough decisions have to be made.

The latest capital raising plays

Since our last edition we've had a good run with capital raising plays, clocking up gross gains of about $16,000 as follows:

September 16
Bendigo & Adelaide Bank:
applied for $30,000 worth of shares across two entitlements and allocated 2000 shares at $6.75. Sold for an average $8.29 for a profit of $3083.

September 17:
Goodman Group: $20,000 into two 1-for-1 entitlement offers at 40c and exited for 58c to make a profit of $9000.

September 18
Energy & Minerals Australia:
$15,000 into two entitlements to $15,000 SPP at 21c but scaled back to just $4084 allocation which were sold at average 25.7c for a profit of $914.

September 21
Hills Industries:
$5000 into SPP at $1.40 but scaled back by 50% to 1786 shares. Exited at $1.94 for gain of $964.
Amcor: $25,000 into two entitlement offers at $4.30 but scaled back to 656 shares costing $2820. Exited at $5.56 for profit of $826.

September 22
Bank of Queensland:
$8000 into entitlement offer at $10 with no scale back. Exited at $10.81 for profit of $648.
Sedgman: $10,000 into $10,000 SPP at $1.30 but scaled back to 2693 shares worth $3500 and exited at $1.695 for profit of $1063.

Check out this complete chronological list of all capital raising plays in 2009 and at the bottom is a list of the 30 or so upcoming offers.

There's also this version ranking the top 60 plays since January. For the latests shuffles in our ridiculously large tiny share portfolio, check out all trades in 2009 plus the full portfolio of more than 700 holdings worth less than $50,000.

Press Room, podcasts and latest radio spots

Below are the latest contributions:

774 ABC Melbourne - with Lindy Burns discussing the knee-capping of Telstra.

774 ABC Melbourne
- talking with Bruce Guthrie and guest Malcolm Turnball about the media.

1233 ABC Newcastle
- discussing Telstra with Emma Tonkin and Garth Russell.

Click on the link below to get the latest radio and AGM audio.

More Cornwall cartoons for The Mayne Report

Former Fairfax and Crikey cartoonist Mark Cornwall has been contributing his satirical commentary to the Mayne Report since March 2009. Here is a collection of his best cartoons and there are now some amusing animations he has begun. Go here to see his animations and below is one of his latest offerings:

The Mayne Report Rich List

Since we began compiling the Mayne Report Rich List documenting every Australian currently or previously worth more then $10 million, it has grown in numbers, now up to 1375 entries, and popularity such that no other feature on our website can match it for traffic. Here are the latest entries:

Douglas Battersby:
former director of Eastern Star Gas who has a shareholding of around 30 million. The stock bottomed at 20c in October 2008 but has since recovered which pushes his wealth north of $30 million.

Geoff Brady:
the veteran Melbourne car dealer owns 3.6 million shares in carsales.com.au which are worth more than $12 million.

David Casey: managing director of Eastern Star Gas who has a shareholding of around 8 million. The stock bottomed at 20c in October 2008 but has since recovered which pushes his wealth to around $10 million.

Don Cheeseman and Steve Eskrigge:
started a small electricity retailer in New Zealand before coming across the pond to Australia. Along with Steve Eskrigge, he owned 1.47 per cent of Victoria Electricity which was purchased, in April 2007, for $48 million by New Zealand-based infrastructure group Infratil.

Ashley Edgar:
general Manager Exploration & New Ventures with Eastern Star Gas who has a shareholding of around 7 million. The stock bottomed at 20c in October 2008 but has since recovered which pushes his wealth to around $10 million.

David King: director of Eastern Star Gas who has a shareholding of around 20.4 million. The stock bottomed at 20c in October 2008 but has since recovered which pushes his wealth north of $20 million.

Steve Kloss:
CEO of Melbourne-based Pentana Solutions, which also owns carservice.com.au, which specialises in the supply and development of automotive computer systems tailored to Asia Pacific dealerships. He owns 2.435 million shares in carsales.com.au worth about $10 million.

Peter Lansom:
executive-director of Eastern Star Gas who has a shareholding of around 7.5 million. The stock bottomed at 20c in October 2008 but has since recovered which pushes his wealth to around $10 million.

Dennis Morton:
large shareholder of Eastern Star Gas who has a shareholding of around 14.6 million. The stock bottomed at 20c in October 2008 but has since recovered which pushes his wealth north of $13 million.

Alex Sundich: director of Eastern Star Gas who has a shareholding of around 9.9 million. The stock bottomed at 20c in October 2008 but has since recovered which pushes his wealth north of $10 million.

All the recent share trades

We've continued with all this tax-loss selling of late after this run of wins from capital raisings. Check out all the trades so far this year and here's the world's biggest small portfolio. Anyway, here's the trading since the last edition:

September 7, 2009: portfolio of 702 holdings worth $47,833. Overall paper loss of $13,566 and average holding worth $68.

September 22:

MacArthur Cook Industrial Fund: bought 1789 at 28c
Milton Corporation: bought 30 at $17.04
Traffic Technologies: bought 8621 at 5.8c

September 18
Toro Energy: bought 2,085 at 24c

September 16
Forest Enterprises Australia:
bought 3,230 at 16c

September 14
Structural Systems: sold 14,700 at 85c

September 9
CSR: bought 257 at $1.95
Watpac: bought 570 at $1.77
Goodman Fielder: sold 340 at $1.60
Energy Minerals Australia: sold 1,776 at 24c
Antares Energy: sold 1,590 at 25c
ING Office:
sold 238 at 53.5c
sold 50 at 95.5c
Sunland Group: sold 95 at 76.5c
Service Stream: sold 86 at 55c
Toll Holdings: sold 19 at $8.51
Transpacific Industries: sold 19 at $1.55
Intermoco Ltd: sold 668,000 at 1.7c

September 8
bought 320 at $1.59
Whitehaven Coal: sold 4,928 at $3.45

September 3
Manas Resources
: sold 6,000 at 13c

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We have only been twittering for a few months, but now have more than 720 followers and are regularly dropping out the latest developments from AGMs, capital raising plays and even Manningham Council. Sign up above to get the latest updates from all our activity and check out some of the latest tweets.

Over this past week we've twittered about having lunch with Ron Walker and some of our share plays, including a tip to get on the share register of Forest Enterprises Australia which announced a capital raising and then left the door open with a delayed record date.

That's all for now until next week.

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.