The Canberra press gallery is asleep, Stephen Bartholomeusz is “too young” and apparently there must be something in the water at Fairfax because they can’t seem to please old McCrann.
Here is an extract from McCrann’s final spray on Business Sunday last week:

McCrann Sprays Diet Kohler

Rupert’s tabloid business commentator Terry McCrann really does seem to have lost the plot all of a sudden. Here are the last two paragraphs of his spray at Alan Kohler on Business Sunday:

“The Financial Review money’s answer to the weather bureau opened the year predicting inflation would be the big problem for the year and then uncannily predicted five or six of the two interest rate rises. The Fin was joined mid-year by almost all the experts. The paper’s star diet-cola confirmed his uncanny ability to get predictions exactly right after the event.

Writing after the Coles Myer vote that it showed you could forget it if you didn’t have the board or the institutions behind you forgetting how he had written three weeks earlier that Lew held all the cards. And diet showed he was worth every penny of your eight cents a day by cannily predicting that Ansett would be flying again as I speak under the Singapore banner.”

We are gathering up all of McCrann’s sprays at his fellow commentators over the years as part of a piece where we give the bearded one the biggest spray he’ll ever get.

Stay tuned and send in your tips folks as this could be a bumpy ride.

There are many people very upset with McCrann’s appalling columns defending Lew and now his bizarre attacks on fellow commentators. This is the amazing Terry McCrann spray at his colleague Bryan Frith in the most recent Weekend Australian.

23 Nov 2002
Frithy, me old mate, my logic mugs your collegiate fantastica

By Terry McCrann

Fraternal feelings apart, my colleague’s views on Coles’ future provokes an uncivil war of words

MY colleague Bryan Frith would seemingly want ASIC to start cross-examining shareholders in public companies on why, and on what basis, they hold their shares.
ASIC would then have some sort of power to prohibit shareholders from exercising their votes if it determined they held those shares “inappropriately”.

This is the implication of his — Frith’s — call for ASIC to “regulate” the so-called “renting” of shares and their votes as Solomon Lew has done with Coles Myer.
Indeed, specifically according to Frith, whether ASIC should “allow it”. Not to put too fine a point on it, Frith’s call is outrageous, silly and simply unworkable.

To explain. Since the boardroom battle erupted, Lew’s direct interests have bought around 3.5 per cent of Coles Myer, at around $6.35 a share. Cost: Near enough to $300 million of real, actual dollars. The controversial bit, is that some of the purchases were accompanied by put and call options — which, not insignificantly, added close to $50 million more to the outlay. And this meant that, for those shares covered by the puts, Lew could give them back to the sellers.

… Now I can understand why Frith might want that. It would provide him with a year’s columns. For my part, I would want some good reason, other than: “There oughta be a law against it.”

Four or five things seem to have escaped my colleague. First, this practice of “renting” shares is likely to happen only once more in our lifetimes. And then only if — if, some time next year Lew tries again.

… Consider the circumstances at Coles Myer. Lew starts with nearly 7 per cent and is easily the single biggest shareholder. He “rents” a further 3.5 per cent.
It’s a unique company where the institutional holding is relatively low, and small shareholders are unusually significant — and where there’s a unique issue for a contender like Lew to campaign for their votes, in the discount card. He gets the votes of one-in-every-three shareholders — I’d suggest, unprecedented. But only after he’s been prepared to print his own proxy form and send them to every single shareholder. He spends $10 million on his campaign. He gets over 22 per cent of the total number of Coles Myer shares — significantly, Bryan, above the takeover threshold. And he loses. Perhaps Frith could nominate who’s likely to try it next?

… It costs money. Big money. Writing about Lew “renting” the shares makes it sound like someone renting a dinner suit. Rather than spend the dollars to buy one.
In Lew’s case, he bought every single one of the “rented” shares. At full market price. Plus, he paid a further $2.60 for the put option on each of those shares. That’s to say, for the first parcel of 18 million shares bought and optioned, he had to part with $162 million — as against only $114 million if he’d bought them, instead of “renting” them. But yes, he can get almost all of that back. But yes also, the interest bill is ticking on $162 million. It works out costing him around 16c per “rented” share. So is it worth it?

Yes, according to Frith, if it can get you control of the target company. On the cheap. Except, point three, it can’t. All of this has to operate under the fundamental 20 per cent takeover prohibition. If Lew had started with 10 per cent of Coles Myer, he could only buy another 10 per cent. He could also only “rent” the same extra 10 per cent — because, apart from anything else, he is buying them.

… Except the “renting” route would cost more actual dollars, albeit without the risk of getting stuck with shares that then fell in price.
That’s why it makes sense, and why it’s legitimate. Why shouldn’t a shareholder — any shareholder — option shares as they see fit to protect, maximise, or achieve anything at all, as they see fit, in their own best interests?

Institutions are optioning their shares all the time. If the Frith logic applied to Lew, it would have to apply to all shares under some form of option. And in that case, who would “get” the vote. At bottom line, the argument is driven by a knee-jerk attitude that it doesn’t “seem right”.

Why should you be able to “rent’ votes? Well apart from the fact, that you aren’t. You’ve — Lew — has actually and fully bought the shares. But, why not?

… Ah. But Lew gets control on the cheap, without making a bid. No he doesn’t, unless he could have anyone by buying up to 20 per cent.
And it’s absolutely no different, to shareholders giving him control by giving him their votes in proxies, but not selling their shares, and renting him the votes.
That’s entirely their choice. Unless and until Frith gets to socialise the market, and has “nanny” ASIC telling investors what they can and cannot do with their shares and their votes.

CRIKEY: Col Allan quite rightly refused to run this one in The Daily Telegraph. Fancy having your business columnist attacking your own political columnist like this.

5 Mar 1996
No Balance Given To Cheryl

By Terry McCrann

I MAY have missed it in the tens of thousands of words of comment, but has anyone from the learned ranks of the Canberra press gallery pointed out the slight flaw in Cheryl Kernot’s claim to have a “balance of power” mandate in the Senate?

The small flaw being that she and the Democrats won’t actually hold the balance of power.

Time and again since Saturday night, I’ve seen Cheryl being interviewed on the box, smiling sweetly while claiming a mandate to block the sale of Telstra.
But I have yet to see any interviewing journalist respond that the Democrats don’t actually have that power – even when joined with the Labor Party.

For there is the little matter of the two continuing Senators, WA Green Dee Margetts and Tasmanian independent Brian Harradine. If they cast their votes with the government, the sale of Telstra would be endorsed 39 to 37 – irrespective of whether a Democrat or Tasmanian Green Bob Brown won the last seat in that state.

… As Senator Harradine is both sensible and pragmatic, any concerns he might have over the privatisation of Telstra could be dealt with – leaving Cheryl and her colleagues whistling in the wind.

The key point that has got lost in Senator Kernot’s very effective seduction of the press gallery and the electronic media is the fundamental change in the Senate. Labor needed the support of the Democrats and the Green twins. The new government however, only needs the support of either the Democrats or the Greens (one or two, depending on Tasmania) and Senator Harradine.

… Yet in the welter of comment on the election, all this has been virtually ignored by a press gallery seduced by personality and style. Not exactly unexpectedly, after the way the press gallery let Paul Keating get away with lie after lie through the 1980s – well before the L-A-W spells lie tax cuts.

ONE example that is lodged deep in my consciousness is the time he claimed how badly the economy had done “under 10 years of Fraser “. One would expect even the most average Canberra journalist to query that, given that Fraser was only in power for a little over seven years. Especially as the 10 years was crucial to the – utterly false – point he was making. But not then, nor since, have I seen any Canberra journalist pick him up on that – just one of many examples where he twisted the truth to substantiate a claim. And got away with it.

… Malcolm Farr in the Daily Telegraph must come close to claiming the accolade, as he did both in one short piece. Farr claimed the Keating legacy was one of the most extraordinary of “any” national leader because of its breadth and longevity.

True only in the sense of the breadth and longevity of lying to, and cheating of, voters.

Farr also said Howard was a “scaled-down national leader’. Perhaps it might be more apposite to make a judgment after he has actually been in the job.

But if bringing back integrity and decency to public life in Australia, in both personal and policy terms, is to be a “scaled-down leader” let’s have more Matchbox models.

14 Nov 1995
The ’80s’ Weren’t all bad nor the ’90s’ all Good

By Terry McCrann

IT IS extraordinary that a business columnist in a `quality’ newspaper should choose to defend Solomon Lew’s secret 1987 deal to dump a parcel of shares in his then newly listed Premier Investments.

At a more basic level, it is astonishing that any journalist would – as The Age’s Stephen Bartholomeusz did last Friday – rather casually endorse non-disclosure of information of interest and importance to his/its readership.

Now, I have a great regard for Stephen’s abilities – I could even claim him as a protege, from his cadetship at The Sun News-Pictorial and later at The Age.
So perhaps his comment reflects his lack of institutional memory of the battles that were fought through the 1970s and 1980s in this area, and doesn’t seem to fully understand the deal and its regulatory context. But I can assure him, contrary to his belief, that both it and its non-disclosure would have attracted very strong criticism from all the commentators at the time: apart from myself, Bryan Frith, Bob Gottliebsen and even his former editor, Alan Kohler. And a firm regulatory response from the stock exchange.

There’s a tendency, evident in his comments, from those that `weren’t there’ to roll up everything that happened in the 1980s under one homogenous head of `the excesses of the 1980s’. In fact, we saw a wide spectrum of behaviour, from the illegal through the improper to the undesirable to the less-than-textbook pure in an imperfect world. And they attracted different critical comments and regulatory responses – however inadequate and unsuccessful the latter may have been.

…All this has a very important contemporary resonance. For just as it is misleading to parcel up `the 1980s’ in one box, it would be extremely dangerous to see the rhetoric of corporate governance today as signalling we have moved into an era of rigorously proper behaviour.

Now, there are two aspects to the Lew deal which are separate but linked. They are the non-disclosure and the deal itself. The non-disclosure, or more accurately the deliberate exercise in deceiving shareholders and the market generally, was totally unacceptable and improper, even in the mythical context of `Stephen’s 1980s’.

The only public announcement on the deal by Premier remains its statement on November 19, 1987, one full month after the stockmarket crash. That statement referred to the deal’s disclosure to the October 30 statutory meeting of the company.

…Premier’s chief executive Harry Cooper now says Premier in fact spent $4 to acquire the company (Yearpledge) in which the shares resided – along with around $16 million of debt. It’s just a tad rich for Cooper to abuse me for not realising this when the company’s own statement said the very opposite… the statement made no reference to the fact that Lew and Cooper were in fact the sellers. It did not say the shares had been acquired pre-crash, and it did not say that at the date of both the statutory meeting on October 30 and the November 19 statement, the parcel was worth $6 million less than Premier had paid.

The statement implied that Lew had joined the RB board as a consequence of Premier’s acquisition. In fact, he had joined five months earlier following the personal acquisition of the shares by himself and Cooper.

As to the substance of the transaction, contrary to Stephen’s assertion, the crash is fundamentally relevant.

COOPER now claims the board considered and – an interesting word – “approved” the purchase of the RB shares on October 5, before the crash. This leaves unstated at what point Premier was contractually bound to buy the shares – could it have backed out when the crash cut their value by $6 million below the purchase price?

It is also interesting to note that Cooper says Lew gave a “detailed report on the investment to a board meeting” on October 30. That seems to imply the board – to be exact, Lindsay Fox and Frank Jones – decided to buy 25 days earlier, without a detailed report.

The key point, which Stephen does not understand, is that the transaction should have been subject to prior shareholder approval at a general meeting.

…Thus, even if a decision to buy had been taken on October 5, it could not actually have been done before the crash. So at least other shareholders would have had the right to vote on whether they still wanted to spend $16 million buying shares then worth only $10 million.

It is also inevitable that the deal will be examined in the context of the two other controversial deals involving Lew. Precisely because all three deals benefited Lew (to the aggregate tune of $31 million); all should have been disclosed at the time they were done – none were; and two at least of them should have been subject to shareholder approval.

Stephen also say the RB deal was “no Yannon” because Premier shareholders made a profit on it. That totally misses the point. Stephen is too young to understand the deep fear and loathing after the crash – no one knew how far share prices would fall. A queue from my office to his could be formed of people who would have loved to have been taken out of pre-crash investments at pre-crash prices.
The fact that it all came good in the end – a year later – is totally irrelevant.

In fact, the transaction is worse than Yannon. The RB deal involved a straight transfer of an over-valued asset from Lew to Premier, initiated by Lew and Cooper. We are yet to know the full story of Yannon, but it is possible – as I have written before – that if done openly at the time it could possibly have been sort-of justified. At least with Yannon, outside parties – Coles Myer executives – actually did the deal. The RB deal was totally `in-house’.

CRIKEY: McCrann has really enjoyed spraying the Fin Review in recent years as these extracts from his columns demonstrate.

4 Jan 1996
Business Community Remains Reserved About Bernie

By Terry McCrann

A SURVEY by the Australian Financial Review has refocussed the issue of the role of the Reserve Bank, and in particular that of its governor, Bernie Fraser.
Rather bizarrely, the AFR interpreted the survey results as a vote of confidence by the business community in the present management of the Reserve.
Bizarrely, because the most striking feature of the survey was arguably a clear vote of no confidence in Mr Fraser. And less clearly, an indication of dissatisfaction with the wider Reserve leadership and/or its structure.

The AFR asked the chief executives of banks and major industrial companies and market economists who they wanted to succeed Mr Fraser as governor when his term expired in September. Some 59 replies were received, and the AFR reached its conclusion on the basis that 53 per cent voted for Mr Fraser or his deputy Ian Macfarlane.

However, in actual numbers that majority was only one above the barest possible margin – some 31 voting for the present governor or deputy and 28 against both of them. And Mr Macfarlane strongly outpolled Mr Fraser 19 to 12 – so barely 20 per cent of the respondents wanted Mr Fraser to have a second term.

This commentator sees that as a rather stunning vote against Mr Fraser. And a less than enthusiastic endorsement of Mr Macfarlane. And it gets worse when you break the overall numbers down, for the bank chief executives not surprisingly voted eight to three for the present duo…. Exclude them, and there was a 25 to 23 majority among the company chief executives and economists against the incumbents. At its kindest, a somewhat less than ringing endorsement. And Mr Fraser scored only a 17 per cent endorsement from this group.

Now it might more generally be argued that the survey results are more complicated – and confused – and cannot really be divorced from perceptions of the desirable role of the Reserve and its governor.

Treasury secretary Ted Evans scored four votes – so it might be said (Paul Keating’s) `official family’ (and all that represents) actually scored 35 votes or a pretty healthy 59 per cent. And indeed, this could be increased by the six votes for David Morgan, now a senior executive with Westpac but in his younger days a Treasury official very close to the young Mr Keating. And not entirely incidentally, spouse of former close Keating colleague Ros Kelly. So you could say that as much as 41 votes were for current or past members of the Keating `official family’ – getting up to 69 per cent.

The relevance of the exercise is somewhat less than that accorded it by the AFR – not exactly surprisingly as it initiated the survey, and given the paucity of anything to put in the paper at this time of the year. For given the nature of the question, the answers add up to more like 53 per cent of five-eighths of very little.

There has never been a true outside appointment to the job. Mr Fraser is the first and only non-Reserve Banker, and he came from the office next to Mr Keating’s where as Treasury secretary he had sat ex-officio on the Reserve board. So asked the question, most would sub-consciously think the choice was between governor, deputy-governor and Treasury secretary.

… Now the AFR’s economics editor Alan Mitchell argued that Mr Fraser was a strong governor that had made the Reserve genuinely independent of the government.
This, according to Mitchell, had inspired a high degree of market confidence in the Reserve’s independence, as was evident from the poll on his succession.
Those thoughts were as bizarre as the paper’s interpretation of the survey.
For two reasons. The argument is not supported by the objective evidence – of the poll, the level of real long-term interest rates, or indeed Mr Fraser’s own exposition of his role.

The second is that it is most un-Mitchell. He normally adds intellectual rigour to the AFR’s interpretation of affairs, albeit with a broader compassionate perspective. One can only conclude he wrote his comments when overcome by the good feelings to man (sic) of the festive season.

There can simply be no question but that Mr Fraser has politicised the Reserve. Not in the simple sense of being Mr Keating’s lackey, manipulating for example interest rates to suit his political purpose. But because Mr Fraser sees his job of managing monetary policy made more effective by being inside the overall policy-making tent. And in particular that the Prices and Incomes Accord needs to be supported because, as he sees it, it helps him control inflation without excessive pain.

It is precisely this belief which will be tested in 1996 and thus Mr Fraser’s governorship. Plus the much harder question of what he would – will? – do if inflation stays stubbornly high into a sharply slowing economy.

17 Feb 1999
Selection ‘Shock’ at Least for Organ’s Rreaders

By Terry McCrann

Let’s hope the ever more increasingly authoritative Australian Financial Review is not too offended by the Telstra board’s choice. Last Saturday’s edition informed its readers that the short list for Telstra’s new chief executive “has now come down to three: (Paul) Rizzo, (Peter) Shore and the mysterious Mr Septic Tank II”. No buts, no ifs, no qualifications.

Monday’s The Fin even put a name on the mysterious yank: AT&T executive, one Daniel R Hesse. Importantly and delphicly, further in-depth research at our premier financial organ, had enabled the mighty Fin to slash the candidates by exactly the percentage of Telstra that has been floated so-far.

Now, that’s got to mean something, well, delphic. For Monday’s edition disclosed that three had become two. The Telstra board would meet next week to choose between Rizzo and Hesse. The authoritative organ went on to disclose that retiring chief executive Frank Blount favored Hesse. But a substantial number of directors favored Rizzo.

…Wouldn’t you know it. These directors will do anything to offside the authoritative organ. Why, they – along with the other 19 million or so of us – have even conspired to have the economy perform quite unlike the way The Fin says it’s performing. We had the downright nerve not to plunge into recession. The market’s been so uppity in not going over the cliff 1987-style.

Why, it’s getting to be that the only bit of The Fin that makes any sense these days is the man who ‘coulda been a contender’ for the Telstra job.
That’s if names still mean anything these days. And that’s columnist Imre Salusinszky. Which is saying something, because Salusinszky writes like a verbal variety of Salvador Dali.

THERE must be something in the Fairfax water. For incoming chief executive Fred Hilmer – normally the most rational of persons, and I say that in an absolutely positive sense – launched an extraordinary attack at the Fairfax extraordinary general meeting last week. What was extraordinary – about his attack, not the meeting – was that Hilmer launched it at his own shareholders. He seemed to be accusing them of conspiring against the company.

Let’s put it down to the over-excitement of moving from CEO theory to CEO practice, as we’ve got too much to thank Fred for. After all he gave us national competition policy – which has done more to get Australia headed towards the 21st century than all the (Paul) Keating vision in the world.

BUT there must be something in the Fairfax water, for there’s also the case of The Age newspaper’s editorial last week. Which editorial? Well, OK. Any editorial. But one in particular took the prize for Inverted Logic of the month.
The learned Age clearly went through the analytical version of the sort of research that gave its sister publication The Fin the inside ‘dope’ on the Telstra succession.

It took exception to the suggestion that John Howard might open the Olympics next year. Terry McCrann continued The Age chastised Howard lest he not accept that “until such time as she is displaced, the Queen is Australia’s head of state”. “Section 69, bylaw 1 of the Olympic Charter states unequivocally: “The Olympic Games shall be proclaimed open by the head of state of the host country,” The Age thundered from the very depths of its impressive research.

So who does The Age think should open the games? The Queen? In accordance with the unambiguous rules of the Olympic Charter? The rules by which The Age argues Mr Howard cannot? No-o-o-o. The Age plumps for the governor-general, citing that the IOC has indicated that despite its charter, it is flexible on the question.
And because the governor-general is an Australian. Well, so also is Mr Howard. And if the IOC is ‘flexible’, surely that ‘flexibility’ extends to Mr Howard just as much as it would extend to the governor-general?

How can The Age in basic logic use the head-of-state requirement to rule out Howard, and then use the ‘flexibility’ argument to rule in the governor-general?
Who after all is the direct representative of the Queen who The Age thinks is totally inappropriate?

Silly me. It is an Age editorial after all.

Peter Fray

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