It is hard to dispute that without Paul Little, pictured, there would never have been either transport giant Toll Holdings or its sibling Asciano but what on earth made the company feel that they had to pay their founder a fee not to compete when he left?
It might only be a fraction of the nearly $4 million paid to Little when he departed at the end of December (the total $6.4 million published in Toll's annual report is distorted by accounting treatment of options he already held), but it makes little sense to Insider.
Admittedly, Toll first disclosed a year ago that it had agreed to pay $250,000 to Little to stop him setting up against the company, or take any phone calls from competitors to provide advice. And it also entered a $125,000 a month consultancy agreement ( equivalent to $1.5 million a year), which it said would see him available for all of 2012.
But Insider has been amazed that highly capable businessmen such as Toll chairman Ray Horsburgh and the head of its remuneration and succession planning committee, Harry Boon, both thought it necessary to pay the "no compete" money.
After all, it is a piffling amount in the world of Little (although, Insider would happily take it). He has been receiving multimillion-dollar salary and share packages for several years, and was a stone's throw from billionaire-dom in this year's BRW rich list. He already has a large construction company to help keep the wolf from his door.
Little's departure was clearly a planned event, with Brian Kruger hired in 2009 as chief financial officer to try out for the role, and Little's retirement unveiled in October 2010, followed by Kruger's selection as chief executive a year later. From the outside, it has been one of the most graceful departures of a chief executive among large Australian companies, with no hints of dissension.
Little is even slated to return as a non-executive director, after a decent interval to give Kruger time to establish his independence, and would earn a minimum of $150,000 a year in that role.
He also just happens to be Toll's second largest shareholder, with a shade over 5 per cent of the company worth more than $170 million at yesterday's market price.
Insider cannot think of any reason on earth that it would be in Little's interest to work against the company that he spent half his adult life creating, let alone help anyone else to do so when you have such a major financial interest.
When Toll and Asciano were separated in 2007, Little and other executives all signed on to standardised executive agreements that incorporated "confidentiality and non-compete clauses".
It seems odd that those clauses were not deemed sufficient to hold back a man of Little's pristine reputation from acting to the detriment of the company, particularly when his departure seems to have been on amicable and generous financial terms.
Shareholder questions were brushed aside at last year's annual meeting, and Little himself was quoted as saying he had no intention of competing. Insider would have thought Toll's board, and Little, were smart enough to drop that extra payment.
Alesco slams door
ALESCO Corporation has hit the remote, closing the garage door in the face of its stalker, Dulux Group, ahead of calling for the takeover police.
Predictably, Alesco chairman Mark Luby and his team declined Dulux's request that they back a takeover offer formula that they had already rejected.
Alesco has stuck to its guns on saying it will recommend only a $2.05 a share bid that comprises $1.30 of cash from Dulux, and 75? of its own, fully-franked dividends (then again, Dulux will actually be bankrolling any dividend because Alesco does not have the cash).
But that offer combination cannot be made by Dulux without breaching the truth in takeovers provisions which means everyone is now headed back to the Takeovers Panel (including the corporate watchdog) for an adjudication.
The star chamber rules of the panel forbid either Dulux or Alesco discussing the issue, although Alesco investors should be watching for a statement by the middle of next week, when the paintmaker will have to make a declaration on either extending the closing date of its offer (currently September 11) or declaring it free of conditions.
Dropping the conditions would mean that Dulux can keep any shares tendered into the offer, although abandoning the 90 per cent minimum acceptance level is always hard because it makes it that much harder to mop up remaining holders.
With Alesco's annual meeting looming on September 18, Dulux would have at least 44 per cent of its target's shares to vote on every resolution at the meeting such as the remuneration report, re-election of director John Marlay and a package of performance rights for managing director Peter Boyd.
They wouldn't, would they?
imcilwraith@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
What payments did Toll Holdings make to Paul Little when he left, and how much was the non-compete fee?
Toll disclosed it agreed to pay Paul Little $250,000 as a specific ‘no‑compete’ payment. It also had a consultancy agreement paying $125,000 a month (equivalent to $1.5 million a year). The article notes nearly $4 million was paid when he departed, while the $6.4 million figure in Toll’s annual report is distorted by accounting treatment of options he already held.
Why did Toll’s board pay Paul Little a no‑compete fee if he was already the company’s founder and a major shareholder?
According to the article, the board (including chairman Ray Horsburgh and remuneration committee head Harry Boon) decided to pay to prevent Little setting up against Toll or advising competitors. The article’s commentator found the extra payment puzzling given Little’s reputation, long service, and his large shareholding that already aligned his interests with the company.
Weren’t there already confidentiality and non‑compete clauses in Paul Little’s executive agreement?
Yes. When Toll and Asciano were separated in 2007, Little and other executives signed standardised executive agreements that incorporated confidentiality and non‑compete clauses. The article notes it seems odd those clauses weren’t considered sufficient without the extra payment.
Is Paul Little expected to have any future role at Toll and what would he earn as a director?
Yes. The article says Little is slated to return as a non‑executive director after an interval to give the new CEO time to establish independence. In that role he would earn a minimum of $150,000 a year.
How large is Paul Little’s shareholding in Toll and why is that relevant to investors?
The piece reports Little is Toll’s second‑largest shareholder with a shade over 5% of the company, worth more than $170 million at the referenced market price. For investors, a substantial founder shareholding is relevant because it creates a strong financial incentive for him not to act against the company’s interests.
What’s the current dispute between Alesco and Dulux Group about the takeover offer?
Alesco rejected Dulux’s requested takeover offer formula and is sticking to recommending only a $2.05 a share bid made up of $1.30 in cash from Dulux plus 75% of Alesco’s own fully‑franked dividends. The article says Dulux cannot legally make that offer combination without breaching truth‑in‑takeovers provisions, so the matter is headed back to the Takeovers Panel for adjudication.
What should Alesco shareholders watch for next in the Dulux takeover bid?
Investors should watch for a Takeovers Panel adjudication and a statement expected by the middle of next week, when Dulux must either extend the offer closing date (currently September 11) or declare the offer free of conditions. Also note Alesco’s annual meeting on September 18, where Dulux could have votes on key resolutions if it holds a large stake.
How might Dulux’s stake affect votes at Alesco’s upcoming annual meeting?
The article says Dulux would have at least 44% of Alesco’s shares to vote at the annual meeting on September 18. That level of holding could influence votes on items such as the remuneration report, the re‑election of director John Marlay, and a package of performance rights for managing director Peter Boyd.
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