Babcock & Brown boss Phil Green has just replaced Eddie Groves as “Australia’s most sackable CEO”, although with ABC Learning shares falling to a new record low of just 93c this morning, both should be fired forthwith.
IAG CEO Michael Hawker walked the plank last month after admitting: “I have lost the confidence of a number of our shareholders, which is not tenable for the company.”
The Babcock fiasco is 10 times worse than IAG given the whole empire has crashed even further in morning trade.
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Unfortunately, Babcock still retains all the hallmarks of a private partnership with staff ownership exceeding 40% and four executives sitting on the board. It is hard to believe so-called lead independent director Elizabeth Nosworthy has the stomach to sack Green based on this argument at the recent AGM.
The five independents – Nosworthy, ASX director Michael Sharpe, former BT funds management heavy Ian Martin, German banker and Bayern Munich director Dieter Rampl, and Credit Suisse chairman emeritus Joe Raby need to step in and take control of the situation.
As Merrill Lynch noted in a report today before the latest sharemarket savaging, losing control to the banks was “a further hit to management’s already fragile credibility”:
It was interesting that Trevor Loewensohn was the Babcock man quoted in the press today because he is the most senior executive who wasn’t part of the private Babcock partnership, having built his strong reputation at Schroeders, JP Morgan and UBS over the years. Loewensohn for CEO anyone?
Green also looks personally vulnerable because he is one of the few Babcock executives who didn’t sell down his stake since the 2004 float. And you have to worry about the debts accumulated buying up the following stakes in the various troubled satellites.
- B&B Infrastructure: 17.78 million shares
- B&B Power: 7.08 million shares
- B&B Wind: 4.24 million shares
- B&B Residential Land: 4 million shares
- B&B Communities: 4 million shares
Green is down more than $30 million from these plays and his 12.77 million shares in the head stock are today only worth $64 million.
We’ve put together this video from the recent AGM webcast so you can see Green’s body language as he discussed shareholder equity, margin loans and his own decision not to participate in the recent dividend reinvestment plan.
Babcock’s house banker UBS has today dramatically changed its tune on the financial engineers, slashing its share price target from $25 to just $6.80.
However, UBS is talking up the prospect of a management buyout, all of which depends on the financial strength of the top 13 Babcock executives who together still owned 41% of the company after the 2004 float and have realised more than $500 million from subsequent sell-downs.
With talk of a management buyout and executives under personal financial stress, the independent directors must take immediate control of the situation.
The first step is firing Green and the second is replacing San Francisco-based founder Jim Babcock with an independent chairman.
You just can’t assemble more than $50 billion in debt and destroy more than $4 billion of investor funds and expect to stick around.