Shareholder Activism Rises Down Under; The Most Recent Target Is Seen as a Test of Activism Efficacy for Larger Companies

Shareholder Activism Rises Down Under

The Most Recent Target Is Seen as a Test of Activism Efficacy for Larger Companies


Dec. 2, 2013 6:35 a.m. ET

Shareholder activism, made popular in the U.S. by the likes of Carl Icahn and Dan Loeb, is taking root in Australia as investors bristle over years of poor returns and conservative capital management. Washington H. Soul Pattinson SOL.AU -1.03% & Co., Australia’s second-oldest listed company, is the latest to find itself in the cross hairs of investors who think management isn’t doing enough to generate value. In October, the 110-year-old company, which has interests in businesses ranging from pharmaceutical retailing to coal mining, became the subject of an assault by two of its largest shareholders: Australian fund manager PerpetualLtd. PPT.AU -1.21% and investment banker Mark Carnegie.Mr. Carnegie is leading the push for investors to act more aggressively, having spearheaded unsuccessful attempts to break up national carrier Qantas Airways Ltd.QAN.AU +0.82% and newspaper publisher Fairfax Media Ltd. FXJ.AU 0.00%

But he isn’t alone. New Hope Corp. NHC.AU +1.72% , one of Australia’s biggest coal miners, led a shareholder revolt against the board of unconventional gas producer Dart Energy Ltd. DTE.AU -9.09% —which it has a 16% stake in—that led to the ouster of four directors, including the chairman.

Singapore-based Cashel Capital Partners launched a US$50 million fund in September specifically to buy stakes of up to 20% in companies that it can use to lobby for change. In Australia, once a shareholder’s stake exceeds 20% of a company’s total, it must make a full takeover bid.

Cashel Managing Director Angus Mason said a slowdown in Australia’s once-booming resources sector is exposing lax productivity at companies that could be managed better.

“When the revenue line isn’t growing, people start looking at other things to poke a stick at,” Mr. Mason said.

Potential targets of shareholder activism are paying attention, and so are consultants.Goldman SachsGS +1.10% for example, is tapping expertise it has garnered in New York to provide advice to clients in Australia.

“Activism has become commonplace in the U.S. and is becoming increasingly global,” said Nick Sims, head of mergers and acquisitions for Goldman Sachs in Australia. “How it will evolve in Australia is unclear at this stage, but we are encouraging our clients to be prepared just in case.”

In Australia, shareholders owning more than 5% of a company are able to to call meetings and propose resolutions—including moves to remove directors. This gives them a potentially effective channel for change, said Gabriel Radzyminski, managing director of Sydney-based Sandon Capital.

Sandon, an activist advisory and investment firm, expects to complete fundraising later this week to establish an activist fund with up to 100 million Australian dollars (US$91 million).

“One of the things that we question, though, is whether there is genuinely a lot of scope for hard activism at the very large end of the market,” Mr. Radzyminski said.

Soul Pattinson, with a market capitalization of A$3.5 billion, is a relatively large target, making Perpetual and Mr. Carnegie’s effort a litmus test for just how far up the food chain corporate activism can go Down Under. And, unlike some of the smaller recent targets, the company’s performance isn’t exactly problematic: Its share price hit a record in October and it is up 5.6% in the year to date.

Perpetual and Mr. Carnegie are concerned that Soul Pattinson’s heavy cross-ownership levels with affiliates, including building materials group Brickworks Ltd. BKW.AU -1.53%and Internet service provider TPG Telecom Ltd. TPM.AU +1.45% , are locking value away from investors.

They are pushing for the stakes to be unwound, which could return more than A$1 billion to shareholders. An outcome has been pushed back indefinitely after Brickworks launched a court action over what it says were deficiencies in the claims against it.

“We believe that the proposals are incomplete, inaccurate and unwarranted based on the significant outperformance delivered by both companies over more than 40 years,” a spokesman for Soul Pattinson said.

According to Mr. Carnegie, Australia’s legal system favors companies over shareholders, presenting more obstacles for activist investors to navigate, including strict provisions in takeover rules that limit the ability of shareholders to act in concert.

Still, Mr. Carnegie hopes that the high-profile Soul Pattison dispute will help blaze a trail for others.

“If somebody cracks the code, they’re really going to be able to go all the way,” he said.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: