With Kerry Packer dead, Rupert Murdoch scurrying off to America and
John Singleton resigning from the board of STW Holdings, the ranks of
Australia’s public company boards are thinning somewhat if you’re an
activist chasing feisty exchanges with colourful heavy hitters.

This partly explains the rationale for flying to Brisbane on Wednesday
for an extraordinary general meeting of shareholders in ABC Learning,
which wants to ratify a $600 million capital raising to confirm it as
the world’s biggest childcare company.

ABC Learning CEO Eddie Groves is emerging as a head-kicking Rich
Lister who is happy to tolerate conflicts of interest (his shareholding
in Austock), sue regulators (this court case in Victoria) and hire
politicians (former Children’s Minister Larry Anthony) in a pattern of
“whatever-it-takes” behaviour.

However, voting shareholders have an interesting dilemma on Wednesday because the
placement was at $7.30 a share and the share price had fallen back to
$7.07 this morning. If you had committed to buy stock for more than it is worth would you
be tempted to vote against the capital raising? Of course, recipients
of the new shares are not permitted to vote but how is this governed
and who checks the voting?

Australia’s corporate voting system is already incredibly sloppy
because of the cumbersome manual processes and systems used by the
registrars. Voting on placements is the best way to demonstrate the
flaws in the system because in many ballots the new shares are not all
excluded from the vote as the law requires.

At the other end of the spectrum you have the situation where all
portfolios controlled by a fund manager are banned from voting when
only one of its funds might have participated. For instance,
hypothetically speaking, why should all ABC Learning shares held by
Colonial First State on behalf of six industry superannuation funds be
banned from voting if only three of them actually participated in the
placement?

While placements are inherently corrupt in some senses because not all
shareholders receive an equal entitlement like in a rights issue,
shareholder ratification of placements are generally not controversial
except in smaller company territory when they are used to dilute
independent shareholders or entrench control.

Major shareholders certainly are not expected to vote against ABC
Learning’s issue on the basis of a share price wobble, but the poor
counting serves to highlight how bad the registrar’s procedures are in
determining who has an interest, something which is a major concern in
controversial matters such as last year’s GPT/Lend Lease vote.

Check out the ABC Learning notice of meeting here
and email [email protected] if there is a particular issue you want
raised with Eddie, who sits atop a $2.5 billion company.

Peter Fray

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