Shares in Flight Centre plunged to a low of $14.10 yesterday before recovering to close at $15 as investors savaged the stock in the wake of fund manager Lazard jettisoning the $17.20-a-share privatisation bid by the founders and Private Equity Partners. This morning the stock was up slightly at $15.11.

Lazard was keeping a low profile yesterday but the non-Lazard minority shareholders, led by CBA and Perennial, who control 30% of the stock should be most unhappy at being collectively $56 million worse off.

The defeat of board sponsored shareholder votes is a rare thing indeed in Australia, so check out the full voting results from the meeting in Brisbane on Wednesday here.

The five founders – Geoff Harris, Graham Turner, Bill James, Jim Goldburg and Chris Greive — voted their 47.8 million shares in favour, but in a separate resolution the minority shareholders voted 15.53 million in favour and 8.82 million against. This was a majority of 63.77% but the scheme required a super majority of 75%.

Strangely, Lazard’s 12.45% stake should equate to 11.75 million shares which is more than the total against vote, suggesting they didn’t vote their entire stake.

The $1.6 billion bid was pitched at a 26% premium but one consideration is that the market soared by more than 15% since it was launched on 25 October last year.

Flight Centre was the worst performed stock in the ASX200 in 2005 as a ruthless Qantas and growing internet bookings dragged its share price down by 45%. However, long term investors have still enjoyed a bonanza because the company was floated at just 95c a share in 1995.

Lazard always had the numbers to block the deal so it is surprising that the founders and their private equity backers didn’t win their support before going to the time and expense of putting a proposal. The independent directors – Bruce Brown, Peter Barrow and Howard Stack – aren’t looking too flash today and neither is their adviser ABN Amro.

Caliburn, the boutique adviser to the privatisation bid, will have missed out on a multi-million dollar success fee. Oh well, they made more than $20 million last year and have also just enjoyed a fat fee from James Hardie too.

John Sevior’s team at Perpetual will be watching closely as they decide whether to defeat the proposed privatisation of another Brisbane company, APN News & Media.

Peter Fray

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