Bumper May edition: joining ASA board, Hartigan, dodgy Murdoch, Richo, female directors, pokies, Manningham, Rich List, Cornwall, Santos, RHG, capital raisings and much more

May 19, 2011

Dear Readers,

Welcome to this bumper May email edition of The Mayne Report.

The breaking news to report from yesterday is a successful tilt at the board of the Australian Shareholders' Association. That's only the second win out of 53 contested elections since 1999 as you can see from this complete tilt record.

Check out the News Ltd coverage from the only journalist who attended and listen to this interview with Lindy Burns on 774 ABC Melbourne last night.

Full marks to the ASA board for running a fair election. There was no use of the no vacancy rule and the only commentary on the outside candidacy in the notice of meeting was as follows:

1. No ASA Board has previously supported a nomination from a member with little track record in working within the ASA.

2. Stephen Mayne appears to have considerable skills that could be of real value to ASA.

3. Members of the Board possess no greater knowledge of Stephen Mayne than others members of the ASA.

The ASA AGM was held at the Palace Nova East End cinema in Adelaide and all five candidates were elected unanimously from the show of hands on the floor.

The four incumbents all spoke well. They were described as follows in the notice of meeting:

Michael Perry, 71, deputy chair, former Rio Tinto finance executive and ASA director for six years.

Betty Clarke-Wood, 64, experienced local government professional and founder and convenor of ASA's Ballarat Regional Group since 2002.

Denis O'Sullivan
, 73, former RACQ finance director and chair of Queensland monitoring committee.

Geoff Sherwin
, 72, former senior partner with RSM Bird Cameron in Perth and lead Monitor trainer for ASA in WA.

Each of the incumbents got more than 95% of the directed proxies in favour, compared with 89.25% for the external candidate which comprised 731 proxies in favour and 88 against.

However, chair Helen Dent did hold 607 undirected proxies so if these had been cast against, the margin would have been just 36 votes out of 7000 members, before considering the 50 or so votes on the floor of the meeting.

The board remained neutral on the issue of endorsement and stuck to its commitment to vote the undirected proxies in accordance with the directed proxies, although this proved a moot point as there was no poll and I was elected unanimously from the floor.

This only happened after some solid questions from the floor and Helen was absolutely right to strongly advise I not accompany Paula to the big AICD annual conference in Beijing and instead attend the Adelaide AGM.

The questions from the floor went to issues such as working collaboratively with the board, promoting ASA in the media, having time given council commitments, using the ASA to advance a political career and board tilts.

I gave a very firm public commitment to end contested board tilts and work co-operatively with the board, reiterating private undertakings during the nomination process.

The ASA board now numbers 8 and on top of the 5 directors elected yesterday, there is chair Helen Dent, an ACT-based former public servant and economist, former WA Liberal MP Tom Herzfeld and former Amcor executive Dennis Shore.

It is a well-credentialled board and new CEO Vas Kalesnikoff gave an impressively frank assessment of the ASA's position and challenges yesterday, as the News Ltd coverage reflected.

Vas has spent 20 years in finance and investment banking with the likes of Westpac, Macquarie Bank and Merrill Lynch. It was quite a coup for ASA to secure his services from January 1 this year and he's now knee deep in various strategic, management and operational issues to expand the ASA's capacity across the full gamut of issues for retail shareholders.

The ASA's membership declined by 5% in 2010 and has been tracking between 7000 and 8000 for the last few years.

With 6.5 million Australians owning shares, Vas told the AGM yesterday that a membership rate of just 10% or 650,000 was achievable. Based on the current membership fee, that would represent $70 million a year in revenue and ASA would be an absolute powerhouse in arguably the world's most sharemarket focused economy.

Clearly, big things are planned at ASA and it's great to be on board for the journey.

You should also take the plunge today by shelling out $115 to join ASA. For corporates, membership is just $625 and all you need to do is click on the image below:

Santos and Rio Tinto board election outcomes

Election to the ASA board will inevitably lead to a change in tactics on the shareholder advocacy front.

Indeed, the discussion with Lindy Burns on 774 ABC Melbourne last night went along the lines that peak body board representation probably means the "activist" should now be known as an "advocate".

The reduction in lone wolf activism has been under way for a few months now. I've only attended the Santos and ASA AGMs so far this year and the current AGM mini-season for companies with December 31 balance sheets has been my least inactive since 2004 when we still had our hands full with Crikey.com.

There are no plans to run for any more boards as such tilts could create problems with ASA recommendations.

This means the two in one day effort on May 5 with Santos and Rio Tinto will probably be the last public company board tilts.

And what a way to go out with just 4.85% of the vote from Santos and 3% at Rio on a day when a whopping $107 billion worth of stock was voted against me being a director. The total against vote over 40 tilts now exceeds $400 billion!

The Santos board tilt on May 5 was a triumph because about 70% of the 500 shareholders in the room voted in favour after listening to the campaign speech about why retail shareholders deserved a modestly discounted share purchase plan after a recent $500 million discounted placement to the big end of town.

To watch that speech, go to the 40 minute mark of the AGM webcast archive on the Santos website.

The rising influence of ASA proxy voting

The ASA has traditionally recommended against my public company tilts but there was a surprise endorsement at Santos as can seen in the post-AGM report to members which included the following:

Mr Mayne nominated himself as a non executive director on the single issue of offering all shareholders the chance to participate in a future SPP. Mr Mayne spoke at length on this. While the board recommended against Mr Mayne's election, the show of hands vote was significantly in favour of all 3 candidates. The acting chairman announced a poll. We voted our undirected proxies IN FAVOUR of all 3 candidates. Mr Mayne was not elected.

This was an interesting example of the ASA's rising clout when it comes to proxy voting. Shareholders appointed ASA proxy for $4.5 billion worth of stock last year and at Santos two weeks ago it was 8.5 million shares worth $125 million.

Whilst some of these were directed, this ASA support largely explains why my Santos vote jumped from 16.4 million proxies to 21.6 million in the poll. This lifted the overall vote from 3.7% of the proxies to 4.8% in the final event - the largest increase we've even seen in a poll.

Whilst I was still miles away from getting elected, the day will soon come when ASA's growing roll as a proxy voting machine will be the swing factor in a tight vote.

The inappropriate resurrection of Graham Richardson

Graham Richardson was persona non grata in the media when he was widely expected to be charged with tax evasion after The AFR produced that cracking scoop in 2003 implicating him, Rene Rivkin and Trevor Kennedy in secret Swiss bank accounts related to the notorious Offset Alpine fire payout.

Rene Rivkin was later jailed over an un-related insider trading matter and died in May 2005.

Trevor Kennedy immediately resigned from 7 public company boards, including Qantas, in late 2003 and has not resurfaced anywhere since.

Seven years after The AFR scoop, the authorities walked away from a blizzard of litigation last May without any convictions, but the ATO did secure undisclosed settlements with Richardson and Kennedy.

Paul Barry produced this rollocking account of the saga for The Monthly magazine last year, just as Graham Richardson was attempting to rebuild his overt political influence after a period in the shadows.

So how did Richo resurrect himself to the point where he's now Channel Seven's official political analyst, plus a columnist for The Australian? Why do Rupert Murdoch and Kerry Stokes think he's an appropriate person to have on the payroll?

After Richo emerged as a paid consultant for Sydney property developer Roy Medich and Medich was charged with the murder of underworld figure Michael McGurk in October last year, I just assumed Richo would keep a low public profile.

Naturally he was surprised as anyone when Medich was charged with murder, but you're judged by the company you keep and Richo doesn't exactly have the most pristine record when it comes to morality.

Lo and behold, Richo has now emerged as one of Julia Gillard's biggest public critics, mainly because Gillard is taking a principled position and refusing to recognise him as a Labor powerbroker who should be indulged.

In a paid column paid for Murdoch's Australian flagship last Saturday, Richardson wrote the following: "Five ministers have told me in the past week that Julia Gillard simply doesn't listen."

What on earth are five Federal Labor Ministers doing speaking to someone like Richardson about their Prime Minister?

Isn't it funny how The Australian has run this big campaign about what NBN Co chief Mike Quigley did and didn't know about Alcatel's operations in Costa Rica, yet they can't see any problem with hiring Richardson.

Then again, given that Rupert effectively fessed up to tax evasion with that $77.5 million settlement with the ACT Government last year, News Corp probably sees Richardson as a tax dodging comrade to be sympathised with.

RHG triumph and was that a John Kinghorn dummy spit or sensible tax planning?

Congratulations to everyone who was involved in the impressive shareholder activism at RGH Group which created $100 million in value and ended the dominance of its billionaire founder John Kinghorn.

The successful parties included Geoff Wilson from Wilson Asset Management, Karl Siegling from Cadence Asset Management, both of who are heavily over-weight RHG and have very much enjoyed the fruits of their labour.

Gabriel Radzyminski and Paul Jensen from activist fund Sandon Capital also deserve a pat on the back and have both now stepped up as directors, which could get very interesting now that the Kinghorn family have dumped their entire holding.

Does that mean the Kinghorns are planning to walk out as directors as well? The share sale may well have been tax driven ahead of the 79c fully franked dividend payout, but so far there has been no public indication of the motivation behind the sale.

New ASA CEO Vas Kalesnikoff also impressed some of the aforementioned players in his opening major governance proxy battle, which included this article about the RHG situation in The Australian.

The fund managers and requisitions even set up a dedicated website for the cause. This RHG battle is the best example I've seen in the Australian market of activism delivering immediate rewards to shareholders.

Well done to all involved, including the media which could see the oppression of the minorities that was proposed and devoted plenty of column inches to the cause.

Bunnings, Mirvac, Westfield and Woolies - interesting days on Manningham

The mainstream media haven't cottoned onto it yet but Bunnings are going to have to produce a unique development on Doncaster Hill near Westfield after shelling out an estimated $26 million to consolidate a 3 acre site which Manningham Council requires to be large development exceeding 6 storeys.

Just slapping a giant green Bunnings shed on this prime Doncaster Road site won't satisfy Manningham's planning scheme given we've identified Doncaster Hill as a place for intense development.

Bunnings may have produced a couple of storeys above its stores in Chatswood and Hawthorn, but the requirements on Doncaster Hill will be something altogether different. One of the vendors described it the other day as "quite unique in Australia".

How Bunnings marries up the requirements of its hardware store with the construction of hundreds of apartments will be very interesting to watch. Ultimately, this will be its most ambitious project ever and it's only happened because Woolies has triggered a national land grab for sites by entering the hardware business through its Masters joint venture with US giant Lowes.

Manningham already has more cars per house than any other Australian council and the traffic issues around this Bunings site will be considerable, although the proposal is yet another strong argument for the Baillieu Government to deliver on heavy rail to Doncaster.

Staying with development issues in Manningham, it was interesting that Mirvac finally went public with its circa $100 million acquisition of the 48ha Eastern Golf Club site in Doncaster in this strategic briefing to investors on Tuesday.

With the Baillieu government committed to a detailed feasibility study into a Doncaster rail link, we are ploughing on with literally billions of dollars worth of investment on the hill, including our own $38 million civic precinct centre which would be a perfect spot for an underground train station.

All this activity really kicked off when Westfield spent $600 million redeveloping its Doncaster shopping centre shortly before the GFC struck.

We've now got Yarra Valley Water committed to investing more than $10 million on water recycling plant that will service all the new developments popping up on the hill with a third pipe.

With this being a first for an established urban area in Melbourne, it is a good example of appropriate infrastructure supporting large urban consolidation.

We just now need the train to end Manningham's status as the council with the highest level of car ownership in Australia and the only Melbourne council without a rail or tram connection to the CBD. The Baillieu government has committed to 4 train studies and credible insiders are saying that the Doncaster rail project is the most likely to get up.

It will be a 4 year campaign to deliver such a commitment and another couple of years before it would be completed but as a council we are dead keen to see this happen.

In other developments at Manningham, it was terrific that Simon Crean recently announced Manningham was the best council in Australia for "promoting reconciliation".

Well done to Celia Haddock and everyone else involved.

Finally, if anyone feels like following - our little council would love the support as we only have 70 followers on Twitter after a year!

Reworking the top 100 female directors list

We spent an hour earlier this week reworking the rankings of our top 100 female directors list after a few recent appointments.

We've also strictly ended the rankings at 100 and now have a floating pool below that.

Here are some of the new additions:

42. Arlene Tansey: An American banker who Macquarie brought to Australia in 1994 and was last a senior executive in ANZ's institutional bank before embarking on a director career. Serves on Adelaide Brighton, Pacific Brands and two Lend Lease subsidiaries and previously sat on Sydney Roads Group board before the Transurban takeover.

53. Judith Swales: came to Australia from the UK to run the Angus & Robertson book chain and then went on to run the Goodyear tyre business for several years before joining the Foster's board.

63. Nicola Wakefield Evans: lawyer with strong Asian experience who returned to Australia and joined the Toll Holdings board in May 2011.

69. Penny Bingham-Hall: a very capable Leighton executive focused on external relations for 20 years. Retired in 2009 and was appointed to the Bluescope Steel board in early 2011.

81. Vanessa Wallace: appointed non executive director of Wesfarmers on July 6, 2010. Vanessa is also on the Chairman's Council of the Australian Chamber Orchestra.

Creating a Glenn Milne flutter on Twitter

The Mayne Report twitter account published the following Tweet last Friday:

Glenn Milne has apparently joined the Liberal Party and is aiming to replace John Forrest in the ultra-safe seat of Mallee at next election.

A couple of hours later, Crikey sent the following to its 14,000 subscribers in the "tips and rumours" section:

Milne's one-minute political career. Is former-News-turned-ABC scribe Glenn Milne throwing in the pen and crossing the divide to join the Liberals as a candidate for the seat of Mallee? That's the mail from former sparring partner Stephen Mayne, who tweeted as much this morning, only for The Australian's Ben Packham to issue a Milne denial just 10 minutes later: "Have just checked this with GMilne. He says it's 'rubbish'," Packham tweeted. "'I have no intention fo [sic] going into politics', he said."

The original Tweet was retweeted by 13 people and caused quite a stir on Twitter.

Despite denials by the recently retrenched News Ltd political correspondent, the Tweet was absolutely factually correct.

You see, a different Glenn Milne has served on Mildura Rural City Council since 2005, including a stint as mayor.

It is easy to get the two Glenn Milnes confused, as Wotnews does with the photo in this package of coverage.

But Mildura's Glenn Milne has indeed recently applied to join the Liberal Party and the only motivation locals can envisage is a tilt at Mallee, if and when John Forrest retires having served as a National Party MP for many years.

Milne ran as a high profile independent against National Party MP Peter Crisp in the Victorian election last year and came second on primaries in Mildura with a solid 16% of the vote.

His appetite for higher office is clearly unsated, although the bombshell report about Mildura Rural City Council by former deputy mayor Vernon Knight won't exactly help his chances.

The first step for Milne will be having his Liberal Party application accepted, which isn't a certainly given his voluble attacks on a Coalition partner last year.

Then he'll have to win a sharp preselection contest, before taking on the new National candidate in a three cornered contest. And that all assumes John Forrest retires as expected.

Mildura governance issues widely discussed

Crikey sent this story about Mildura council to its full 50,000-strong email list last Thursday and I followed it up with this summary to 2800 people, including more than 1000 local government councillors and officers.

The explosive 125-page report by former Mildura deputy mayor Vernon Knight has been downloaded more than 1000 times and deputy premier Peter Ryan told local media in Mildura that “the issues raised by Mr Knight are matters for consideration by the appropriate investigating body.”

Given that Mr Knight has raised concerns about the effectiveness of the Chief Municipal Inspector within the Department of Planning and Community Development, the obvious "appropriate investigating body" is the big new anti-corruption watchdog, but its establishment has just been delayed again because Minister Andrew McIntosh says the legislation is a complex process which the new government wants to get right.

Having struggled with a raft of concerns in relation to the Mildura's governance and public attacks on his efforts to hold his colleagues accountable, Mr Knight has certainly now discovered his front foot.

After quitting Council seven weeks ago, he set about documenting a range of matters which were largely ignored by Mildura CEO Mark Henderson and the Local Government Inspector.

A personal presentation of the report to Deputy Premier Peter Ryan and a well-attended press conference last Thursday have put his issues front and centre.

Indeed, The Sunraysia Daily, which is one of only two family run newspaper groups left in Australia, has given the story a huge run. It devoted 11 pages to it in the Friday and Saturday editions of the paper and it continues to bubble along in the letters pages with the overwhelming sentiment being that the current councillors need to shape up or ship out.

Click here to read a package of the local coverage from Mildura and well down to Vernon Knight for bravely stepping up and publically arguing the case for transparency and good governance.

Recent email editions of The Mayne Report

Mildura governance challenges, conduct panels, dog pounds and Tweets
Thursday, May 12, 2011

Council super slug, rate rises, Woodside AGM, lost $1000 bet, pokies article and then some
Wednesday, April 27, 2011

Rio, Santos and ASA board tilts, councillor misconduct, David Clarke, Woolies, pokies, Rich List, capital raisings and Murdoch
Tuesday, April 19, 2011

Special edition on Rio Tinto board tilt
Friday, April 15, 2011

Mark McInnes, Hanson, Boomers, Manningham, MAV elections, defamation, expense claims and conflicts of interest
Friday, March 25, 2011

Bumper March monthly edition: sued, Rio, Packer, MAV, Cornwall, Rich List, Westfield, AGMs and much more
Monday, March 7, 2011

With the RBA set to lift rates and as retailers hurt with the soaring Aussie dollar, Cornwall reflects...


News Corp shareholder resolution will have to wait until 2012

We were hoping to repeat our 2007 effort this year and put up a shareholder resolution for the 2011 News Corp AGM which would propose ending Rupert Murdoch's gerrymander by abolishing the dual class voting system.

Alas, New York-based company secretary Laura Cleveland was good enough to reply to an email inquiry last week with the following extract from News Corp's 2010 proxy statement:

If you wish to submit a proposal to be presented at the 2011 Annual Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act, your proposal must be received in writing by the Corporate Secretary of the Company at the principal executive offices at News Corporation, 1211 Avenue of the Americas, New York, New York 10036 no later than May 2, 2011 and must otherwise comply with the requirements of Rule 14a-8 in order to be considered for inclusion in the 2011 proxy statement and proxy.

She also kindly sent through the News Corp constitution so if an enthusiastic shareholder can be found to submit the resolution, we'll be ready to go in 2012, which will probably be Rupert's last year as an executive before he steps back to being a non-executive chairman and annoints James Murdoch as CEO.

The 2012 News Corp AGM will be just a couple of weeks before the Presidential election so it will be a great time to be Stateside and no doubt Fox News will be dumping vitriol all over Obama as usual.

Private Eye lets fly at Rupert's ethics free zone

The Australian's editor-in-chief Chris Mitchell and News Ltd executive chairman John Hartigan have had a rocky relationship over the years but Rupert likes them both so they continue to prosper within his Australian empire.

However, The Australian's unprecedented campaign against the Gillard Government comes at a time when News Corp's own ethics are under the pump on a wide range of fronts.

By all means campaign against the NBN from an economic perspective but The Australian's ongoing attacks on NBN Co CEO Mike Quigley for what some Alcatel employees did in Costa Rica a few years back have been way out of proportion.

Communications Minister Stephen Conroy was smart to go on Sky News yesterday where his quotes could not be edited out. This is what has been widely quoted saying today:

"There is no suggestion that Mike Quigley was involved in any of the rogue practices by rogue individuals. Individuals who are in jail."

"This is absurd for Mike Quigley to be held responsible for the behaviour of rogue employees, as it is the same for John Hartigan the CEO of News Limited to be held responsible for the activities of people at the Melbourne Storm."

Hartigan will no doubt be thanking Mitchell for this.

And then we've got Rupert's outrageous UK phone hacking scandal and these two items in the latest edition of Private Eye magazine:

Item 1: selectively bagging the bobbies

The serial failures of the Metropolitan police now demand reform, The Times declared after the unlawful killing verdict on the death of newspaper seller Ian Tomlinson at the G20 protests.

"The string of errors is too long for the police to hold off external scrutiny," it added, referring to a series of cock-ups and cover-ups by Inspector Knacker.

Funnily enough, The Times leader omitted to mention one of the biggest blunders by the Met in recent years - the failure to investigate phone hacking properly at News International.

Item 2: inappropriately bankrolling a crooked investigator

It is a truth universally acknowledged that News International is paying the huge legal fees of convicted phone-hacker Glenn "trigger" Mulcaire as he struggles to evade lawsuits from his victims.

News has had countless opportunities to deny this, and the only logical inference from its evasive silence is that the Digger is indeed bankrolling the unemployed ex-jailbird.

Since all Mulcaire's legal manoeuvres in recent months have been designed to prevent the whole truth coming out, this rather undermines NI's recent public apology for its misdeeds and the company's professed commitment to helping police establish the facts.

After all, "Trigger" could speed up the Yard's investigation no end - and save the taxpayers thousands of pounds - by volunteering all he knows: who commissioned him, and when, and over how many years.

Although NI wouldn't be breaking the law footing Mulcaire's bills, what about the Press Complaints Commission (PCC) code of practice to which the company is signed up? Section 15 of the code says no payments may be made to witnesses in criminals trials "once proceedings are active", and that "where proceedings are not yet active but are likely and forseeable, editors must not make or offer payment to any person who may reasonably be expected to be called as a witness".

Proceedings against some Screws executives are indeed now forseeable, and it is likely that Mulcaire will be called to testify. But no one should hold their breath waiting for the PCC to investigate this apparent breach of the rules. Throughout the hacking saga the record of the commission and its embarrassing chairwoman, Baroness Buscombe, has been one of relentless ineptitute. After swallowing NI's "lone rogue" defence and condemning The Guardian "exaggerating" the scandal, Buscombe recently had to offer a High Court apology - with 20,000 pounds damages plus costs - for recklessly libelling Mark Lewis, defence solicitor for some of the hacking victims.

The task of defending Buscombe's pitiful record falls to the PCC's chief spin-doctor, Jonathan Collett, whom she has described as "a terrific communications guy". Fortunately, he's used to tough assignments: between 2005 and 2007, the period covering the original phone-hacking inquiry and the trials of Glenn Mulcaire and Clive Goodman, he was head of public affairs at.....News International.


Sounds a bit like News Ltd in Australia thinking it is perfectly fine to have James Hardie's artful asbestos dodger, Greg Baxter, as chief spindoctor Down Under.

Given The Australian's obsession with Mike Quigley, why isn't the paper doing over its own spindoctor plus the current PCC PR bloke for their associations with dodgy behaviour?

Firing up our Youtube channel again

When The Mayne Report first launched in 2007 we were posting daily videos on our Youtube channel. Alas, the cost and time of in-house video production, plus the lack of any revenue, made this model unviable. Besides, daily videos wasn't necessarily the best way to campaign for better corporate governance through shareholder activism.

In the end, it made more sense to channel our efforts into appearing on other people's videos, such as these two appearances last year on Ten's The 7pm Project, rather than trying to build an audience from scratch.

However, when you look back at all the video we've got spanning our own productions, one-off interviews, profiles or lengthy interviews such as Nine's Sunday program or ABC TV's Talking Heads, the regular spot on Sky's Business View and webcasts of AGMs, it turns out we've got a rather large library of material.

Cross-posting has become much easier now, so we have relaunched our Youtube channel and hope you enjoy our many playlists of material. If you have the right app, you can view the videos on the go using any mobile device.

Some of the playlists on our video site including the following:

11 rounds with Rupert Murdoch

A few rounds with the Millionaires at Macquarie Group

Bye bye Babcock & Brown

The pokies

Oz Minerals and Owen Hegarty

Gender equity and media trustworthiness in Intelligence Squared debates


Highlights from SBS Insight debate on executive pay

Campaigning to end the farmer gerrymander at AWB

Three goes on A Current Affair

Interviews with Dean Paatsch on corporate governance

The 2009 NAB AGM in Brisbane

Skewering Col Allan on Channel Nine's Sunday program

The Wilkie proposal is out there, now for some government resolve

The Parliamentary committee has come up with recommendations for pokies reform and it was indeed the strategic shift as predicted in this recent column for The Sunday Age.

The Liberals ought to be ashamed of themselves for siding with the industry. So much for trying to appease the anti-pokies elements in Family First and the religious right.

Whilst the debate has gone quiet courtesy of the budget and all this attention on refugees and carbon taxes, the government is busily working up its final legislative package which is expected to be comprehensive.

Here's hopnig they hold their nerve in the face of a relentless campaign by a shameless industry.

We particularly enjoyed this recent Media Watch episode when Jonathan Holmes did over Alan Jones for his appalling bias and the fact that his boss John Singleton owns pokies venues and developed the industry's dreadful anti-reform ads.

Finally, check out the latest from Paul Bendat's Pokieact website and this package of our past pokies coverage.

And try watching this 30 second anti-pokies ad made by Paul Bendat last financial year featuring our daughter Alice, who was 6 at the time:

Symex looks after underwriters by scaling back retail "overs"

Port Melbourne-based Symex Holdings is a soap manufacturer which recently paid $58 million to Sara Lee for White King and decided to pay down its debt to ANZ through a $19.8 million 5-for-14 entitlement offer at 42.5c.

Retail investors were encouraged to apply for additional shares but it was a marginal proposition with the stock trading at 43.5c on the closing date.

A quick look at the world's biggest small share portfolio shows that I only owned 200 Symex shares to start, but I applied for a modest $3500 shares to support the company knowing there would probably be a shortfall.

Alas, Symex announced last week that it was scaling back all shareholders who applied for "overs" to just one times their entitlement, even though this left the $19.8 million raising $2.6 million short given only $17.2 million was allotted to existing shareholders.

This means I'll be getting just 106 new shares and a refund cheque of $3456 is presumably on its way.

But why would Symex do this when there was a shortfall in the retail offer? This shortfall was increased by an undisclosed amount to $2.6 million because Symex decided to return a substantial whack of commission free "overs" applications from retail investors and instead allocate $2.6 million worth of stock to the underwriters, Taylor Collison and RBS Morgan.

The dollars involved are not that large because Symex was today trading between 42.5c and 43.5c, but the principle is important.

Symex CEO Greg Tremewen is the President of our local footy club and we'll be having a brief chat about this at the President's lunch on Saturday week.

Slim pickings on the capital raisings front

The idea of funding shareholder activism through capital raising profits worked a treat in 2009 as you can see from this list.

Alas, the model has dried up considerably since then as this summary of recent activities and offers demonstrates:

March result: loss of $210

April 29, 2011
Australian Education Trust:
$2000 into 3-for-10 entitlement offer at 75c with overs. Received full allocation and exited at 81c for gain of $130.

April result: profit of $130.

May 5, 2011
Lynas Corp: $5000 into SPP at $2.05 after placement at $2.07. Scaled back to 828 shares worth $1697 and exited at $2.02 for marginal loss.

May 18, 2011
Symex Holdings:
$3500 into 5-for-14 entitlement offer at 42.5c with overs. Scaled back to virtually nothing despite shortfall.

Offers we are currently committed to

Southern Cross Electrical Engineering: $2500 so far into $15,000 SPP at 90c after placement. Closes May 23 and trades June 1.

Assessing the capital raising pipeline

Here is the list of known offers in the pipeline which remain open and we're considering:

Anittel Group: 1-for-2 entitlement offer at 0.7c with no overs. Closes May 31.

Australian Agricultural Company: $15,000 SPP at $1.42. Closes June 2 and trades June 15.

Mundo Minerals: $5000 SPP at 12.5c. Closes May 25 and trades May 31.

NRW Holdings: $15,000 SPP at $2.74. Closes May 31 and trades June 7.

GME Resources: 1-for-15 entitlement offer at 8c. Closes May 20 and trades May 27.

Southern Cross Electrical Engineering: $15,000 SPP at 90c after placement. Closes May 23 and trades June 1.

Tissue Therapies: 1-for-8 entitlement offer at 50c with overs. Closes May 19 and trades May 20.

Southern Cross Electrical is the only one of those raisings meaningfully in the money. If the stock holds and there is no scale back, it will deliver a profit of more than $2000 next week.

We haven't had a pay day above $1000 since Silex Systems on February 1, so this would be a welcome contribution if it eventuates.

Put a stop to double dipping councillors

The NSW election has seen the election of two Shoalhaven councillors to the state parliament.

Congratulations to Shoalhaven mayor Paul Green who represents the Fred Nile Christian Democrats in the upper house.

Similarly, well down to Cr Gareth "the Albino" Ward who is the new Liberal member for Kiama.

But what on earth are these two chaps doing staying on Shoalhaven council.

In Victoria, it is now illegal to be a councillor and a political staffer at the same time, courtesy of some heavy handed reforms by the Brumby government after the Brimbank council scandal.

NSW has tolerated the double dipping of Sydney Lord Mayor and independent state MP Clover Moore for far too long.

Whilst it should not be illegal for MPs to moonlight with part-time gigs such as running a farm or taking the occasional brief as a barrister, the idea of simulteneously representing two tiers of government is ridiculous.

State MPs are not allowed to also be Federal MPs so are why are both in some states allowed to retain elected roles in local government.

Maybe the ability to regulate this sort of thing will be cleaned up when local government gets its long overdue constitutional recognition at the upcoming referendum due with the next federal election.

Spanish rice bids runs into trouble with growers

A financial adviser to rice growers writes:

Ricegrower bulldustd etectors must be in overload after the board of SunRice recommended shareholders sell their company to Spanish listed company Ebro for $600 million.

Essentially any sale now will hand Ebro all the upside and deprive shareholders of the reward after doing the hard yards over the drought years.

The valuation of SunRice is based on the last 4 years up until October 2010. These severe drought years were the worst the company had ever encountered in its 60 year history which saw rice production drop to a low of 19,000 tonnes or 1% of production highs.

Growers have good cause to ask why the Board would ever support a sale of their company based on worst year valuations. Even more beguiling to them must be the fact they are currently harvesting a 800,000 tonne crop which is not even considered in the valuations. Facilities mothballed during the drought including the Deniliquin mill, one of the world's largest, are now working flat out. The news gets better with next year's crop forecast to be at least 1 million tonnes.

Shareholders have a right to query the independent valuation commission by the board. The board should clarify why they are willing to accept an 8 times EBITDA valuation from the report when the valuation the company used to raise capital only a couple of years before were 11 times EBITDA.

The Board also needs to clarify to shareholders why a major asset of the company was not valued in the independent report. In March the Rice Marketing Board granted SunRice/Ebro the single desk monopoly until 2016 and potentially another 5 years if termination notice applies. The granting of a single desk to a foreign multinational company is unprecedented and defies comprehension. Be that as it may, the old AWB had as its major asset the single desk for Australian Wheat. Surely this asset has a similar value to SunRice and cannot be ignored.

To regain any credibility the Board must immediately issue the company accounts up until end of April. Shareholders will also require a forecast of business performance for the next year (paddy production, currency and market assumptions, Profit and Loss, Balance Sheet, Cash flows) together with the next 5 year assumptions. Shareholders cannot be expected to make a fully informed decision on the rearview information provided. They certainly cannot assess sustainable earnings which is a fundamental to valuing a company.

Donate to help keep us going

The Mayne Report has wracked up losses of almost $300,000 since we launched in October 2007 and we moved to a free model in June 2009 after struggling along seeking subscriptions for the first 21 months.

It has been nice to receive more than $10,000 worth of donations over the past two years and if you fancy giving us a hand to help fund our activism and keep us going on the political and shareholder advocacy circuit, just click on the image below:

How will Tony Abbott cut carbon emissions by 5%?

Tony Abbott is continuing to run a one dimensional campaign against Julia Gillard's commitment to price carbon.

The trick with this issue for the Gillard government will be to simply get the legislation with a modest fixed price of perhaps $20 a tonne through Parliament as soon as possible.

Then the whole issue will turn on whether Tony Abbott will scrap the coming ETS and the lack of credibility of his own pledge to cut emissions by 5% by 2020 with so called direct action.

Now that the Conservative British Government has embraced dramatic action on climate change, Cornwall reflects on the credibility of Abbott's position to wreak Australia's climate change policy agenda.

Gillard and Swan lack credibility on financial management

Australia had its first $1 billion bond issue in more than a year yesterday and the Federal Government got the 12 year paper away at 5.5%, which wasn't a bad result.

Having not delivered a surplus budget in more than 20 years and as gross Federal debt powers towards $200 billion, Julia Gillard really was stretching credibility when she told Barrie Cassidy on Insiders last week that "the debt will be paid off by the end of this decade."

Hang on a minute, wasn't the Future Fund meant to be fully funded by 2020 as well?

As was explained in this piece for Crikey on May 11, the Federal Government still has an unfunded superannuation liability through the Future Fund of $73.4 billion.

And with this projected to blow out by another $20 billion over the forward estimates because the Future Fund is not being adequately funded, how on earth is Labor going to generate close to $300 billion of surpluses between now and 2020 to keep these far-fetched long term financial promises.

It was amusing to read this from Chris Seage in Crikey's budget coverage:

With effect from July 1, the ATO will make directors of a failed company personally liable for their company's failure to pay employee superannuation. A great move in my opinion. The move is expected to increase government coffers by $245 million.

Fair enough, but why aren't Federal Ministers obliged to fully fund their superannuation commitments as they are incurred as well.

After all, that's what happened to Victorian councils when we were collectively slugged $83 million earlier this year to ensure our defined benefit superannuation commitments remained fully funded.

The Mayne Report Rich List

BRW magazine does a great job with its various Australian Rich Lists but we've broadened their efforts to track any Australian who has ever been worth more than $10 million. We've got more than 1500 names with those who've fallen back below $10 million now italicised. Below are our latest new or updated entries:

Nick Tana: a former chicken tycoon who has just bought a second Perth office tower.

Caruso family: property developers in Queensland who recently sold a site for $2.5 million.

Brian Roberts: former mayor of Brighton turned successful property developer.

Ray Dawson: successful property developer in Melbourne's eastern suburbs.

Crikey yarns over recent weeks

Mildura council bombshell...what will Karl Stefanovic say this time?
Thursday, May 12, 2011

Mayne: broken Future Fund promise allows Gillard's surplus ruse
Wednesday, May 11, 2011

Three public sector budgets and debt soaring everywhere
Wednesday, May 4, 2011

Still the Millionaire Factory, just passing the moolah around more
Friday, April 29, 2011

Councils slugged for super, why not Commonwealth and the states
Wednesday, April 27, 2011

Woodside rejects perfectly reasonable carbon disclosure resolution
Thursday, April 21, 2011

Murdoch, Hitler, 1983, beat-ups...doesn't this all sound so familiar?
Monday, April 18, 2011

How Steve Fielding helped billionaires dominate media ownership
Thursday, April 14, 2011

Woolies abusing power in Manningham
Wednesday, March 23, 2001

Happy birthday Rupert
Friday, March 11, 2011

Westfield board changes aimed at avoiding AGM protests
Thursday, March 3, 2011

Interesting times on the talk circuit

It was really interesting spending 90 minutes recently discussing conflict of interest issues with a group of medical researchers.

And what was most encouraging was the level of commitment from the top down this well known institution was showing on the question of ethics and good governance.

It has been quite a busy time on the talk circuit over the past few weeks and the forward agenda includes the following:

Wednesday, May 25: closing keynote address at Local Government Managers' Association annual congress in Cairns. Title is: "Good governance: from public companies to local government".

Tuesday, May 31: participating in debate about reform at annual Our Community conference.

Tuesday, June 7: speech to Legacy.

Wednesday, June 8: corporate governance debate in Sydney.

Thursday, June 16: evening speech to the ASA in South Melbourne.

Wednesday, June 22: speech to local Toastmasters group.

Monday, June 27: annual dinner speech at conference training corporate affairs professionals.

Monday, July 18: evening launch of two new courses for a major university.

Tuesday, August 23: visiting Albury-Wodonga branch of the Australian Shareholders' Association.

Sunday, August 28: speech at interstate university open day.

Friday, September 2: speech at conference of planners and architects in Lorne.

Sunday, October 2: breakfast speech to a group of share traders.

Thursday, October 20: speech to annual dinner of the Mornington division of the ASA.

Meanwhile, click here to read feedback after some speeches and click on the image below if you fancy an engagement as the talk circuit is emerging as a modest offset to the growing losses of The Mayne Report:

We're looking forward to our first ever Jetstar flight to Cairns on Sunday

Sign up for campaign and governance Tweets

Click on the image above to join more than 4300 followers on Twitter. We are regularly dropping out observations about journalism, politics, breaking stories, local government and shareholder activism and you can see our recent tweets. And here are a few examples:

May 16
Mirvac have confirmed they've bought 48ha Eastern Golf site in Doncaster. See:

May 15
After fractious two-hour debate Maroondah Councillors just voted 6-3 in favor of spending $46m on new Ringwood pool.

Apols to Raf Epstein and Adele Ferguson, but just did ABC Victoria ripping into their Saturday hatchet job on Bendigo Community Bank model.

"The debt will be paid off by the end of this decade." Julia Gillard will very much regret saying this on Insiders yesterday.

May 13
Great to see followers surging. Anyone fancy helping out - our little council only has 65 followers after a year!

May 12

A big Steve "Half" Price apology to Hinch:

And respected former Mildura councillor Vernon Knight even has this dedicated website to back it all up:

Ben Knight's father Vern Knight has just dropped this bombshell on Mildura:

Have just submitted a letter to The Oz pointing out hypocrisy of calling for reductions in middle class welfare & then attacking specifics.

Leighton & Southern Cross capital raisings again demonstrate how retail get shafted when their shortfall offer is done after insto bookbuild

Will Swanny's broken glass become like John Kerin's 1991 gross operating surplus bungle - an excruciating and damaging TV moment.

Amusing that Murdoch advocates small govt & his tabloids are hysterically defending middle class welfare with this "150k is rich" rubbish.

May 11
The decision to not fully fund the Future Fund by 2020 is a broken promise by Labor that amounts to many tens of billions of dollars.

The Gillard surplus claim is a ruse based on starving the Future Fund of contributions & allowing unfunded super liabilities to blow out.

Crean announces Manningham tops for "promoting reconciliation":

May 10
Just sold 10k worth of shares in local Bendigo community bank at cost to a former mayor so won't have a conflict promoting inside council.

See AFR's p3 hit on former reporter Matt Coghlan for getting payout from Swan's office & returning as Swan's spinner. He said: "no comment".

Off to lunch in town with a chair of two ASX200 companies. Has some specific issues to raise so should be interesting.

The Cornwall collection

Former Fairfax and Crikey cartoonist Mark Cornwall has been contributing to The Mayne Report since March 2009. Here is a collection of his best cartoons and there are now also some amusing animations. Also, here a couple of old favourites:





Mayne family news

The better half, Paula Piccinini, jetted off to Beijing on Tuesday for the big annual AICD conference. Check out the program.

Meanwhile, 8 year old Alice Mayne has agreed to delay a promised trip to meet the English relatives and instead settled for a short trip with daddy to Alice Springs and Uluru later this year. Alice in Alice Springs was very appealing and the surging Aussie dollar makes it better value given the discounting needed to attract foreign tourists.

Laura, aged 9, is really getting into the swing of things with cross country running and she's loving her new orthotics.

Philip, aged 7, has now done 3 weeks of soccer and also loves to watch AFL on the telly.

Despite barracking for Carlton courtesy of his former best mate at school Matty - the son of the now assistant coach of the Parramatta Eels who left Melbourne Storm last year - I took Philip to his first AFL game of the season to watch the Western Bulldogs beat Richmond on Sunday.

Alice also enjoyed it but we only lasted until three quarter time.

Meanwhile, the school ball will be held next month and all three kids are enjoying the dancing lessons in the lead up.

Paula doesn't get back until Monday so the next three days will be full on with the kids. That's all for now as school pick-up time approaches.

We'll be back with another bumper edition in June and maybe some specialist updates to subscribers and donors before then.

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. Alternatively, follow us on Twitter.