In the lexicon of well-timed share plays by directors, Bluescope Steel
CEO Kirby Adams has joined the list with a $9 million put option deal
that pre-dated a shock profit warning by just six weeks. The chronology
is not a good look, but we won’t say any more than that for now:

23 August, 2005:
Bluescope Steel releases profit headlined “record annual results top $1 billion”.

15 September, 2005:
The benchmark price for steel (called hot
rolled coil) was $US434 a tonne, down some 30-40% on previous highs.
For a company that makes 50% of its earnings from HRC, Bluescope
should have known that its earnings would come under pressure.

23 September, 2005: With the share price above $10 and near a
record high, Kirby Adams takes out a “zero cost collar transaction”
with ANZ which includes put options over 900,000 of his shares. This
“has the effect of protecting the value of a portion of Mr Adams’s
shareholding at a level below the current share price”. In other words,
Adams used a financial instrument to lock in some profits and cover the
downside.

27 September, 2005:
Kirby Adams addresses JP Morgan’s tenth Annual
Asia Pacific Equity Conference in New York City with an upbeat
presentation entitled “Continuing to Reward Shareholders and Deliver on
our Strategy”.

3 October, 2005: Kirby Adams belatedly informs the market about his options deal with ANZ.

2 November, 2005: Stupid Stephen Mayne buys 60 Bluescope Steel shares at $8.36 a pop

4 November, 2005:
Bluescope issues shock profit warning, predicting
2005-06 earnings of 85c-100c a share, a fall of up to 38%. Shares
plunge $1.26 (14.5%) to $7.43.

8 February, 2006: Bluescope issues another shock profit warning
predicting 2005-06 earnings of between 65c-75c a share. Shares plunge
90c to $6.56.

19 February, 2002: Bluescope announces 38% drop in half year profit to $312 million.

22 February, 2006: at 11am this morning Bluescope is trading at
$6.71, about one third below the level when Kirby entered his
arrangement with ANZ on September 23.

Assuming a floor price of $9.50,
Adams has saved himself $2.5 million, not bad for someone on a salary
of more than $4 million a year who has also been given more than $5 million
worth of free shares. I’ll be raising all of this at the next Bluescope
AGM.

Peter Fray

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