Coles Chairman, Rick Allert, reiterated earlier comments at Coles’s AGM yesterday that the Kohlberg, Kravis, Roberts’s offer of $15.25 per Coles share “substantially undervalued” the company.

The Coles board was well within its rights to reject the bid without putting it to shareholders if it believes the offer does not offer fair value for shareholders. Notwithstanding the recent performance hurdle embarrassment and Dawn Robertson’s obscenely generous employment contract, the Coles directors aren’t dummies – among them are a former boss of leading investment bank UBS (Bill Gurry); a former McKinsey consultant (Patti Akopiantz); and one of Australia’s leading liquidators (Tony Hodgson).

Given their outstanding resumes, and the public statement that Coles is worth “substantially” more than $15.25 per share, it would be logical to think that Coles directors would have spent last year feverishly buying Coles shares. Especially since Coles was trading at around $10.50 for most of the year. However, looking at the table below, it seems that the Coles directors weren’t so willing to put their own hard-earned on the line:

Director

Number of shares owned at 30 June 2005

Number of shares owned at 30 June 2006

Shares purchased in 2006

Directors’ Fees

Rick Allert

25,569

25,569

0

$500,591

Patti Akopiantz

3,253

3,253

0

$176,466

Keith Barton

10,200

10,200

0

$164,501

Bill Gurry

140,000

140,000

0

$153,892

Tony Hodgson

6,000

6,000

0

$191,200

Sandra McPhee

4,139

4,139

0

$164,501

Martin Myer

1,000

1,537

537

$171,329

Michael Wemms

208

208

0

$170,825

Belinda Hutchinson

N/A

15,000

N/A

$140,527

Seven of the eight Coles directors did not buy one single share last year. Martin Myer was the exception; however, he only bought 537 shares.

Despite collecting more than $500,000 from Coles (and another $500,000 from AXA), Rick Allert didn’t buy any Coles shares when they were trading at $10, but was quite willing to tell shareholders that those very same shares were worth substantially more than $15.25.

Do as I say, not as I do, huh Rick.

Peter Fray

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