Balanced Equity Management’s Andrew Sisson scored a truckload of publicity over the weekend after fronting the ISS corporate governance conference in Melbourne on Friday as speculation mounts that he’ll use his 4% stake in Qantas to vote down the $11 billion privatisation.

Sisson’s presentation didn’t even mention Qantas but he raised some excellent points, including the question of conflicts of interest and independent expert’s reports.

“The issue with independent expert’s reports is they nearly always come up with the recommendation that the person signing the cheque would like,” he said.

Sisson’s firm didn’t own any Rebel Sport shares but he shot some serious holes in the independent expert’s report by Hall Chadwick Corporate which valued the company at between $4.33 and $4.59, conveniently below the $4.60-a-share offer from Archer Capital.

This valuation included $20 million for the company’s cash, even though Sisson pointed out it had $46 million in net cash as at 31 December, 2006. This unexplained discrepancy was reached “after analysis of the balance sheet and monthly cash flow budgets, and discussions with management.”

How a company with no debt can make $26 million in cash disappear remains unexplained.

Similarly, Hall Chadwick makes no mention of franking credits in the 42-page report either, even though Rebel disclosed $28.36 million of them in the 2005-06 annual report. These are clearly an asset of the company.

Rebel was a company awash with cash and franking credits that could easily have spent $81 million paying a $1 special dividend or capital return.

It’s becoming clearer by the day why Perpetual and Paradice voted against the scheme, but we still haven’t heard an explanation from Invesco about what happened to its 6.5% stake which clearly wasn’t voted against the deal.

The AFR reported the following last Thursday on the morning of the meeting:

Only one of the three recalcitrant investors, Invesco Asset Management, has said on the record it will vote its 6.3% stake against the scheme.

Invesco is refusing to comment about its unexplained backflip and the Federal Court approved the deal yesterday. Where on earth is ASIC when you need it?

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Peter Fray
Peter Fray
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