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Listed companies provide a bizarre start to the year

By Peter V O'Brien

Friday 24th January 2003

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It could be an interesting investment year if the unusual events that marked the first three weeks continue for the next 49.

The top news was the sudden resignation of BHP Billiton chief executive Brian Gilbertson due to "irreconcilable differences with the boards" of the Australia and UK-based group.

BHP Billiton's news release was a model of the careful corporate speak used on such occasions. It said: "To resolve this situation [the irreconcilable differences] and in the best interests of the company and its shareholders, Mr Gilbertson decided to resign.

"'Brian and Paul Anderson were the primary architects of the successful merger of BHP and Billiton that has made the group one of the world's leading resources companies,' BHP Billiton chairman Don Argus said today. 'We wish him every success in the future.'"

Mr Gilbertson also had a say, or agreed to the words emanating from the board and its spindoctors.

"During my time at BHP Billiton it was a privilege to lead an experienced and talented management team as we created the leading player in our industry. I have every confidence in the future success of the group under [new chief executive] Chip Goodyear's leadership."

Mr Argus said Mr Goodyear had the full support of the board in continuing the strategic approach announced last year.

It can be presumed the board approved the "strategic approach" after considering recommendations from Mr Gilbertson and other senior management.

There was still confusion this week about what happened in the group, despite the theories of Australian investment analysts and other apparent "experts," some with vested interests.

Confusion always accompanies such events, as shown last year when the chief executives of AMP and Tower "resigned" after falling out with their boards and in the early 1990s when half of the board of Westpac went on a Friday afternoon, a situation conveniently announced after Australian markets closed for the weekend.

Investors need to be aware of two matters in such situations:

* A board will usually ensure a showdown between directors and the chief executive is conducted with minimal presence of other senior management, the latter probably pre-organised to keep their mouths shut; and

* Directors close ranks. In the Westpac situation the ranks suddenly thinned and those routed to what the military used to refer to as "previously prepared strategic positions" obviously agreed to maintain the corps' honour through a code of silence.

Shareholders, potential investors and regulators are entitled to detailed and precise statements of what caused chief executive resignations.

They should also be told immediately of settlement payments, rather than waiting for formal reports months later.

That is a rare occurrence.

Fobbing-off people, as well as stock exchanges and other regulators, with vague references to, for example, "irreconcilable differences" is intolerable, insulting and an indication of directors possibly protecting their backsides. Directors are custodians of shareholder interests. That means all shareholders, not just those who are also directors.

* * *

A statement from Feverpitch International that it would acquire privately owned childcare company KidiCorp through the issue of 117 million shares was unusual, to the extent of being almost bizarre.

Feverpitch is a new capital market (NCM) company specialising in providing software for online betting. A share issue last year had a substantial shortfall. The bizarre elements in the proposed acquisition were twofold.

A company set up to exploit gambling instincts turned to childcare but said it would retain the software interest until it had investigated ways to "maximise the value post of the acquisition."

There are organisations desperately trying to advise kids of the dangers of gambling.

The proposed deal is effectively a reverse takeover. KidiCorp's owners will hold the majority of Feverpitch's shares and are intended to replace the board of the technology company, with the exception of managing director Derek Handley, who will manage the transition process, and chairman Richard Waddell.

The lesson for the investors in the scheme is that nothing is permanent, particularly in technology-based companies. Their listings have a value and direction changes and/or reverse takeovers could be a feature of 2003.

* * *

Fletcher Forests and subsequent events provided the third unusual occurrence.

It was the third time a Fletcher company's share trading was investigated for possible insider trading, although that was no fault of the corporate entity. Bizarre as that was, it became more bizarre on National Radio's Checkpoint programme on January 17.

Independent investment analyst Brian Gaynor said the Securities Commission was not doing enough about insider trading and the commission's timeframe for its investigation indicated a lack of urgency.

Mr Gaynor is obviously entitled to his opinion about the commission, but he is a "guardian" of the New Zealand Superannuation Fund. It is interesting to speculate what he would say in the (unlikely) event a fund investment manager was investigated sometime for insider trading. Wearing too many hats can cause headaches.

There was an error in a reference to Skellmax in Peter V O'Brien's sharemarket article published on December 20. The sentence should have read: Its radio advertisements jingle includes the line "we have been around since 1910," referring to the Skellerup Industries arm of group operations.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


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