With the economics of independent business journalism under siege — as Crikey’s Paddy Manning has explored in recent days — how should Australia’s only business daily, The Australian Financial Review, respond to the challenge? I’ve noticed an increasing trend of AFR coverage which is slanted to favour the transaction industry, major corporates and their investment banking advisers.

An interesting recent example was the lengthy feature by Robert Harley and Mercedes Ruehl on December 27 which explored “How the wild, wild Westfield restructure deal was eventually won”.

The 2000-word story was obviously partially sourced from UBS investment bankers Matthew Grounds and Guy Fowler, as is noted in the piece. It talked about the “magic” of Frank Lowy and how a combined $8 billion in value has been created through the controversial $60 billion restructure of the group approved in June last year.

Unfortunately, the journalists didn’t speak to enough people on the other side of the argument.

If the AFR had called, I would have told them that the Lowys suffered significant reputational damage courtesy of poor advice from investment bankers which included a number of  hardball tactics that sometimes bordered on “dirty pool”. The main element of this advice — announcing a new demerger plan on the day the vote was narrowly going down and then deferring the Westfield Retail meeting to allow more time for arm-twisting — has been widely analysed. There are, however, plenty more examples. For instance, the Westfield camp successfully knocked the Australian Shareholders’ Association out of the public debate by engineering a complaint to ASIC that we were giving financial advice without a licence.

I’ve since left the ASA and still don’t know precisely who made the complaint but it was leaked to the AFR which ran a story that had the effect of ending ASA’s public campaign against the transaction. This explains why there was so little debate at the “bland” resumed Westfield Retail meeting on June 20, 2014. An ASIC commissioner subsequently told ASA that the complaint was engineered by the Westfield camp and was baseless. Up until that point, ASA was playing a very prominent role opposing the transaction, as the December 27 AFR feature noted, despite lacing its descriptions with pejorative language such as “vitriol” and “harangued”.

The AFR feature did confirm another aggressive tactic by Westfield when it revealed that a letter threatening “damages” sent to broker CLSA resulted in the firm not releasing a second survey assessing how Westfield Retail institutional shareholders would vote at the resumed meeting.

Another significant AFR omission related to the role of Melbourne-based proxy adviser Ownership Matters, which is the key adviser to Australia’s industry funds and played a major role in the campaign against the transaction. Why would the AFR not speak to Ownership Matters and only mention that the two international proxy advisers, ISS and CGI Glass Lewis, had recommended in favour?

A more thorough journalistic dig on this issue would have taken advantage of the access provided by the Westfield camp to reveal which key Westfield Retail shareholders flipped from “against” to “for”  between the May 29 and June 20 meetings.

The AFR was quite a cheerleader for the transaction from the start. Chanticleer columnist Tony Boyd enthusiastically embraced the Lowy family position and even went so far as to declare that any Westfield Retail shareholder who voted against should be publicly outed “so that all can see who was behind what might be the biggest long term value destruction in years”.

The December 27 feature continued this myth when it made the following claim:

“In hindsight, a victory for the institutions would have been a loss for many Westfield Retail investors. Scentre Group has performed strongly since the merger. Ironically, the small investor interests were more aligned with one of Australia’s richest men than one of its largest superannuation funds (UniSuper).”

Yet earlier in the piece, this position is completely contradicted with the following claim:

“Of the $8 billion created for investors in the two stocks since the announcement of the deal in December 2013, $6.4 billion has accrued to the investors in Westfield Group and $1.6 billion for those in Westfield Retail.”

And that’s the point: it was a lopsided transaction that has clearly created more value for the Westfield vehicle in which the Lowys had their prime investment, as was explained in this Crikey piece on June 3 last year.

Now that 84-year-old Frank Lowy is chairing both Scentre Group and the internationally focused Westfield Corporation, the upcoming AGMs of both companies in May should prove very interesting indeed. There will be much to discuss, including the likely reincorporation of Westfield Corp to shareholder unfriendly Delaware.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey