On Tuesday, Crikey investigated the close links between brokerage house, Austock, and major client ABC Learning Centres. However, with Austock expecting to float later this year, it is worth nothing that ABC isn’t the only client with extremely close ties to the broker.
Timbercorp, the listed agribusiness investment manager is also closely intertwined with Austock. Timbercorp noted in its 2006 Annual Report that it paid Austock (which is chaired by Bill Bessemer, who resigned from the board in March 2007) the sum of $1.46 million for “professional services”.
What Timbercorp didn’t mention in its Annual Report was that its founder, CEO, and largest shareholder, Robert Hance, also happens to have an ownership stake in Austock (as noted in the SMH’s CBD column in July 2006). While Hance’s stake isn’t strictly required by AASB1124 to be mentioned, it would seem that such disclosure wouldn’t be unwarranted. (It should be noted that Timbercorp’s non-disclosure is less consequential than ABC Learning Centre’s non-disclosure, given that TIM paid Austock far less than ABC did for investment banking services).
Hance’s ownership interest in Austock isn’t the only common factor. Apart from providing investment banking services, Austock was one of the few brokers to cover Timbercorp, noting as far back as 2002 that the company was a “strong buy” (a fair enough claim, given that TIM scrip was only 50 cents at the time).
However, the links don’t stop there. The Future Capital Development Fund is a private equity fund that invests in Australian business. The fund was initially chaired by former Austock boss, John Wheeler (who resigned from the fund on 30 January 2007, one day after he resigned as managing director of Austock). Coincidentally, the equal major shareholder in the fund was a company called Timbercorp (WA) Pty Ltd, which owned 8 percent of shares (that stake was subsequently reduced to 4.64 percent). Timbercorp (WA) Pty Ltd is controlled by Hance (and is used as Hance’s vehicle for his 17.64 percent ownership interest in Timbercorp).
Ironically, another substantial shareholder in the Future Capital Development Fund is one Edmund Stuart Groves – CEO and founder of another Austock client, ABC Learning Centres.
Another common thread is the Api Fund. Api is a managed fund of which Austock Property Funds Management Limited is the Responsible Entity. CEO of the fund is Austock director, Vin Harink. Among the fund’s investments (as at 30 June 2007) sits 2,000,000 units in the Timbercorp Primary Infrastructure Fund. Api isn’t listed as a substantial holder in TPIF’s 2007 Annual Report (as its interest is not held in the fund’s name and is less than 5 percent), but its holding is equivalent to 3.64 percent of the fund’s capital.
Crikey is certainly not suggesting that either Timbercorp, or Austock, have acted illegally in any way. However, it would be fair to submit that the commonality of interest between Timbercorp founder, major shareholder and CEO with its investment banker may be of interest to Timbercorp shareholders and could warrant additional disclosure.
Timbercorp has had a difficult run of late, largely due to an adverse ATO ruling which meant that investors will no longer be able to claim upfront deductions for their contributions on the basis that the investor is “carrying on a business”. As a result of the ATO draft ruling, TIM shares dropped from around $3.00 to currently be $1.60 per share. A test case against the ATO’s ruling is pending, with Treasurer Peter Costello noting that “if the industry won the test case then of course the immediate upfront deductibility would continue.”