Billabong founder Gordon Merchant and the board of the stricken surfwear giant have faced intense questioning from shareholders about why a bid to buy the company at $3.30 a share was rejected, and why a second bid at $1.45 a share also collapsed.
But Merchant has retained his seat on the Billabong board, despite a number of big institutional shareholders voting against his re-election. He ended up getting the support of 68% of shareholders, suggesting a large protest vote.
Annual general meeting season is one of the few occasions where directors have to face rank-and-file shareholders – and after a year in which many companies have underperformed, the rank-and-file wants its questions answered.
And Billabong shareholders – who have seen the stock fall from as high as $17 to just 86c in the last five years – had plenty of questions, mostly around the collapse of the two takeover bids, both of which were made by private equity firm TPG.
The first bid, at $3.30 was made in February and collapsed after Merchant and another director, Colette Paull, wrote to the Billabong board telling them they would not entertain a bid below $4.
Outgoing chairman Ted Kunkel rejected the idea that Merchant and Paull’s letter had scuttled the first bid, saying the view that Billabong was worth more than $3.30 a share was held by the entire board.
Thankfully for investors, several members of that board who got this call so wrong are now on their way out.
The second bid at $1.45 collapsed just weeks ago after TPG decided to walk away. That has left the market wondering what TPG saw in Billabong’s books that so worried them. Worried investors put this question to Kunkel yesterday.
“Their reasons for their withdrawal are their own, and Billabong is not going to speculate on their reasons,” Kunkel told the AGM.
“Following due diligence, no new information came to the company.”
Investors have no other option now than to hope new CEO Launa Inman can lead the company’s turnaround or find another potential bidder.
The other big AGM of the day was Fairfax Media, which has emerged from a horrible winter that saw the company post a loss of $2.7 billion and announce it would cut 1,900 jobs, including more than 300 from its editorial divisions.
The Fairfax board has also been wrestling with a constant barrage of criticism from major shareholder Gina Rinehart, who owns 14.9% of the company and has been fighting for representation on the company’s board – so far without success.
Rinehart sent the chief development officer of her company Hancock Prospecting, John Klepec, to the meeting yesterday – and he didn’t fail to stir things up.
Klepec joined a long line of shareholders criticising the performance of the company, its board and particularly chairman Roger Corbett.
Klepec said the company should prioritise paying down debt and selling assets to restore some value to shareholders, who have seen the company sink to all-time lows on a number of occasions in the last month.
“How can we not be critical when we’ve lost so much money?” he said.
Klepec even compared the Fairfax situation to that of cyclist Lance Armstrong, saying there has been plenty of blood spilled at the riders’ level, but none at board level.
But Klepec’s biggest weapon was the votes attached to Rinehart’s 14.9% stake and he used them to vote against the company’s remuneration report.
Under new laws, a company that gets two “strikes” against its remuneration report – a strike being a “no” vote of 25% or more – will face a board spill the following year. Rinehart’s shares held take the “no” vote at yesterday’s meeting to 34.4%, giving Fairfax its first strike.
Investors did win one concession though – chairman Roger Corbett agreed to calls from the floor to reduce his chairman’s fee by about 7% to below $400,000.
This article was first published on LeadingCompany’s sister site, SmartCompany.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
