Fresh from leading last month's surprise vote against Namoi Cotton's management, the biggest shareholder in the 60-year-old ginning business wants another general meeting to propel its own candidate onto the board.
Sydney-based boutique investment group, Samuel Terry Asset Management, also recently made it known it wanted to see Namoi Cotton broken up or sold to get a better return to shareholders.
The investment firm operates under the interesting motto of "We buy old junk. We sell antiques", although it insists it does not regard Namoi as "old junk".
It is now using its 19.9 per cent stake in Namoi Cotton, accumulated over four years, to recommend executive chairman of South Australia's Kiland timber business, James Davies, should join the cotton company's five seat board.
Samuel Terry, which has a small but diverse portfolio of investment interests, is also a 40pc shareholder in Kiland, which is transitioning from forestry to sheep production after about 4.5 million tonnes of timber were scorched by the 2020 black summer bushfires on Kangaroo Island.
It has two directors at Kiland Limited, formerly known as Kangaroo Island Plantation Timbers.
The jostling for a candidate on Namoi's board coincides with last week's sudden resignation of director of the past four years and former NSW grain handling and milling industry boss, Joe Di Leo, leaving at least one free board room seat as he concentrates on other commitments.
A Samuel Terry Asset Management (STAM) representative said the investment group expected Namoi would generate significant cash flow from its ginning, cottonseed and grain commodity handling operations in the next few years and directors would need to make important capital allocation decisions with its resources.
"Mr Davies' appointment will assist the board in these decisions and help to ensure capital is allocated in a manner that maximises value for all shareholders," the spokesman said.
He said Namoi had been on "a complex journey" in recent years, and the big shareholder was grateful for actions "which have placed the company in its present, desirable position" given good irrigation water availability and strong prices set the scene for more cotton plantings.
"Samuel Terry is appreciative of the board's efforts over the past several years," he said.
His comments contrast slightly with a release to the Australian Securities Exchange three months ago, when Namoi reported STAM had advised it did not support the company's growth initiatives and suggested the lowest risk, highest return strategy for the cotton business was an orderly break up, or a whole of company sale.
That swipe was followed on July 19 by Samuel Terry's dominant vote at the Toowoomba AGM which meant almost 60pc of ballots cast at the meeting opposed Namoi's remuneration report.
This subsequently set the scene for the board to be dismissed if the cotton company's next report on key management salary and incentives was also rejected by more than 25pc of shareholders at the 2023 AGM.
Remuneration vote ambush
Despite previous talks with Samuel Terry representatives, the AGM move surprised the board which felt it had being careful with its remuneration strategy and that STAM's actions did not represent the majority shareholder view.
The investment firm apparently encouraged bigger incentives for board and management, in particular bonus shares to directors to reward growth in the company's share price.
Samuel Terry won't comment about its preferred remuneration strategy except saying it did not support current arrangements as detailed in the remuneration report.
"We articulated this concern to Namoi's board in advance of the AGM and provided suggested changes to the remuneration framework," the spokesman said.
STAM's latest suggestion, for Mr Davies to be appointed as a new director, was now being considered by Namoi Cotton, which confirmed it was obliged by the Corporations Act to hold a shareholder meeting before October 5.
We're not a big company and we could operate quite well for a while with four directors- Tim Watson, Namoi Cotton
Chairman, Tim Watson, said the board was still to discuss replacing Mr Di Leo, but selecting a new director usually involved spending some time appraising suitable candidates, including taking external expert advice.
"We're sorry to see Joe go because he has been a very competent and hard working director, but we're not a big company and we could operate quite well for a while with four directors," he said.
Wary of consequences
Mr Watson was also aware accepting Samuel Terry's board recommendation without careful consideration would imply to other shareholders and the industry that Namoi directors actually supported STAM's preference to sell or break up the business.
"We certainly do not support that view," he said.
"We have rejected it, but we continue to evaluate all options, including all growth opportunities to maximise shareholder value."
Both the recommendation to break up the company and STAM's AGM vote decision had surprised Namoi because the investor had previously been a "very supportive shareholder", including taking up a full quota of shares offered in last year's capital raising.
STAM has released a statement saying it felt Mr Davies had relevant capital allocation experience with regard to agricultural enterprises to be an appropriately qualified Namoi director.
He was not and would not be an employee of Samuel Terry, nor would he be remunerated by Samuel Terry.
Mr Davies has 35-plus years of experience in investment management across timberland, economic infrastructure, real estate and private equity situations.
Aside from his role at Kiland, which is developing about 19,000 hectares for agricultural use and converting its burnt timber into 900,000 tonnes of biochar, he chairs property investor, Eildon Capital, is on the board of ASX-listed New Energy Solar, and an advisor to AGR Partners, an agribusiness-focussed US-based private equity firm.
He was previously funds management at New Forests Asset Management and has worked in senior roles at Hastings Funds Management Limited and Royal Bank of Scotland.
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