follow up report from crikey.com.au

  1. 18,561 Posts.
    Here is the full report from yesterday's meeting.

    It's a well balanced view.

    March 11, 2003

    Considering ecorp shares were floated at $1.20 in 1999 and reached a high of $8.60, the proposal to pay 55c to minority shareholders was sure to spark some heated debate at yesterday's special meeting.

    ecorp are to be congratulated for their efforts on transparency and disclosure given they created a special 'independent committee' (excluding the PBL-nominated directors), sent shareholders reams of information and commissioned an independent valuation.

    The deal was probably always going to get up considering the 55c offer represented a significant premium to the 6 month weighted average share price (37c), and was also higher than the independent expert's valuation of 45-48c.

    However this did not stop several questionable tactics being employed to get the vote over the line. And the fact that the minority shareholders are being pushed out by none other than 76% owner PBL, things start to smell a little fishy.

    For one, Alison Deans, CEO of ecorp, chaired the meeting in the place of the PBL-nominated Peter Yates. Deans vigorously declared her independence and claimed she was not conflicted in giving her recommendation in favour of the proposal.

    The fact is that Deans stands to make almost $1,000,000 in consideration for her options and would also be getting a (highly sought after) job with PBL. Now Alison, it is wonderful that you declared these 'economic interests' up front, but mere disclosure does not remove the conflict.

    And don’t give us that garbage that in making your recommendations you were only considering the company and acting in the interests of minorities. If every minority shareholder had the same Golden Carrot dangled in front of them, the vote would have been 100% in favour.

    Considering the way the proxy count unfolded, question marks over Dean's true independence deserve to be aired.

    103 million proxies were received of which 73m were in favour and 13m against. At this point, the deal hung in the balance because it required 75% approval. Enter Alison 'I’m not conflicted' Deans, and the 17m open proxies were directed (surprise, surprise) in favour, bringing the result to an 87% proxy victory.

    Deans was rapped over the knuckles (by the ASA) by declaring how she would direct the open proxies before any discussion occurred. Unlike James Packer at the recent CPHIC meeting, she offered no contrition but said she thought she had made clear she was keeping an 'open mind'. Yeah, right.

    To be fair, Deans handled the meeting relatively well and is obviously a smart cookie, but her questionable position made things look very untidy.

    The other bone of contention for many shareholders was the fact that in promoting the deal, the Board effectively talked down ecorp's future prospects. After 45 minutes of this spin, several shareholders skewered Deans by asking why, if the company was so awful, are PBL so interested in owning 100%? After some applause, Deans' stumbled in her reply and momentarily turned to Yates in desperation, before getting back on track with a corporate-speak reply.

    Another slightly dirty tactic (employed with regularity) was the constant reminder of the valuer's suggestion that if the deal was rejected, the share price would dive back to the 37c mark. If that ain't a subtle form of pressure to undecided voters, what is?

    Plenty of punters had a whinge about the huge drop in ecorp's share price over the years, which gave various Board members the opportunity to give their prepared responses. They stressed how although the company was in better shape, the market's valuation of them had changed and this was outside their control. Peter Yates even said that directors and managers could only be held accountable for the company’s financials, not the sharemarket price.

    The fact that this point was made repeatedly and vehemently creates an exquisite irony.

    If directors and senior managers should not be held accountable for the share price, what is the point of options? It appears that corporate fat cats can enjoy the upside of options but are simply "not accountable" if the market values them on the downside.

    The smell of hypocrisy was starting to waft through the room as the last and most glaring example of double standards came up. After several questions about the company's investment criteria, Deans claimed that there were no suitable investments (within their criteria) available for their $150m in cash.

    One punter described this as a "cop out" and was one of several people to suggest ecorp should have, could have, and can still look outside their internet/e-commerce investment criteria (instead of the capital reduction). Deans said that this just wasn’t possible as no opportunities existed, which sounded both disingenuous and flimsy.

    And up on the podium, an unusually quiet James Packer had nowhere to hide. That other Packer vehicle chaired by James, CPH Investment Corp, ironically had an investment criteria which precluded the e-commerce sector. As the Mann brothers pointed out, this did not stop them from investing in companies including Comindico and Solution 6. This double standard was perhaps lost on young JP.

    Perhaps he was still smarting after a cheeky shareholder managed to include a reference to One.Tel in his question. On hearing the awful word, Packer bowed his head for several minutes, seemed to go a little red, and when he finally looked up, looked slightly forlorn.

    All up, perhaps the 55c is a good deal for minorities, but given the strong-arm tactics and double standards, you can't help but think Packer and PBL are getting the best deal.

    Well done to the many punters who got up and voiced their opinion, even in the face of apparent inevitability. We'll leave the last word to someone who has obviously been to plenty of similar meetings. When someone asked Deans if the proxy numbers meant it was a done deal, a wise but resigned voice quietly stated:

    "It always is."


    Regards




 
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