GrainCorp shareholders are taking the drama of a potential takeover in their stride, with the uninvited $2.4 billion offer failing to generate a single question at Wednesday’s annual general meeting.
In keeping with the sometimes prickly mood at past annual meetings of the former grower-owned grain heavyweight, this week’s AGM at Sydney’s Hilton Hotel was expected to hear pointed questions on the takeover details, grumbles about last year’s deflated $71 million net profit, and “please explain” queries from a cohort of supposedly disgruntled corporate investors who voted against four resolutions.
In fact, the AGM will probably be best remembered for finishing early, and the generous spread of gourmet sandwiches and pastries offered up at lunch.
Just two shareholders spoke up, concerned about GrainCorp’s Ukraine market risk and grain receival issues at the Grong Grong silo in southern NSW.
Unknown `protest' voters
However, an bloc of unidentified shareholders did add some unexplained spice to the meeting, contributing to a solid 37 per cent and 38pc vote respectively against the re-election of long serving director, Don McGauchie and fellow board member, Peter Richards.
They also generated a 16pc vote against performance rights being granted to managing director, Mark Palmquist, plus opposition to the board’s staff remuneration recommendations.
We are not going to consider selling, except on very acceptable terms,
The big storage, marketing and processing company's chairman, Graham Bradley said the Long-Term Asset Partners $10.42 a share bid, confirmed in early December, was still an indicative offer and there was no certainty about it becoming a binding proposal, despite LTAP having access to about 1500 GrainCorp documents.
LTAP had also held frequent confidential due diligence briefings with the big listed agribusiness in the past two months and received written responses to about 250 questions.
Details of who was actually involved in the complex, debt weighted structure behind the bid, or the terms of an eventual proposal had still not been divulged, although LTAP chairman, Tony Shepherd, had assured Mr Bradley the engagement process remained “active”.
GrainCorp has set no deadline on LTAP’s deliberations.
Mr Bradley and Mr Palmquist admitted they were not surprised such an unorthodox and highly leveraged proposal would take time to formulate given its unconventional nature and potential financial challenges involved for the previously unknown LTAP.
If it proceeded, the takeover has been tipped to likely cost LTAP more than $3b, when coverage of GrainCorp's own debt is included.
“We are not going to consider selling, except on very acceptable terms,” Mr Bradley emphasised.
Should a binding offer be received GrainCorp would assess its merits to “deliver superior value to shareholders” against other alternative business improvement and capital review strategies also being evaluated.
These other options had also attracted “serious interest” from a number of parties considering purchasing parts or parts of the company.
"Regrettably, I am not in a position to disclose further information about these parties or discussions today, as our engagement is ongoing, incomplete and the details are, of course, subject to confidentiality," he said.
Mr Palmquist also flagged more streamlining of the company's business model following big savings and operating efficiencies gained from recently merging the grain marketing and storage and logistics activities.
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Despite a silent investor protest vote against the AGM’s remuneration report, speculated by media reports to have been led by at least one of GrainCorp’s biggest shareholders, the AGM supported the board’s view that remuneration recommendations for key management personnel were in line with the company’s performance and market position.
However the 18 per cent, “no” vote crept close to the 25pc mark which rates as a strike against a company, which, if repeated, can trigger a spill of the entire board.
GrainCorp's biggest shareholders include Perpetual Investments and Ellerston Capital, associated with the Packer family and a past early seller of shares when the Archer Daniels Midland bid was launched in late 2012.
Long-serving director, Mr McGauchie, and fellow board member Peter Richards were both re-elected by a 60pc-plus margin.
What's the message?
Mr Bradley said he did not know who specifically had voted against the two directors and other AGM resolutions, or what particular message they were sending.
He said no shareholder had raised any issues with the board and he was intrigued no comments had been made to enlighten the meeting.
The board was disappointed by the vote against the remuneration recommendations given "we consulted widely with our largest shareholders and no concerns were raised then, or privately".
Asked after the AGM whether some investors were unhappy about GrainCorp’s initial slow response to LTAP's approach in November and his early dismissal of the strength of the cash offer, Mr Bradley said he could comment on what the “message” may have been.
He said LTAP bosses were “very happy” with GrainCorp’s response to their inquiries.
However, he noted he had long been critical of the “two strikes” rule introduced by the then Howard Government Treasurer, Peter Costello, for the very reason it could be used by activist shareholder groups with agendas unrelated to remuneration concerns to unseat a board of directors.
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