AACo's jilted jackaroo

Australian Agricultural Company's new shareholder IFFCO has helped vote down the cattle farming group's controversial proposal to buy two Northern Territory cattle stations from Allan Myers QC, Australia's most prominent silk jackaroo.

The 77 million to 29.3 million vote verdict underscores rumblings in the market that the transaction, in which Myers would sell his Tipperary and Litchfield stations to AACo as part of a $89.8 million investment, would disadvantage other shareholders. While Myers ostensibly paid the money for a 19.9 per cent share in AACo – part of the stake that Futuris originally owned – he would have effectively netted $15.2 million via the sale of Tipperary and Litchfield for $105 million.

This was clearly not cricket in the view of the other major shareholder that purchased a 19.9 per cent from Futuris in two tranches, IFFCO, a privately owned group based in the United Arab Emirates (Futuris' renewed pastures, February 25). Arunas Paliulis, a director of IFFCO and a nominee for the AACo board told the media today that the vote was a "great encouragement.”

IFFCO, or International Foodstuffs, has been a prominent critic of the Tipperary and Litchfield acquisitions, along with former AACo chairman Nicholas Burton-Taylor. AACo and independent experts BDO Kendalls hit back at the IFFCO criticisms last week, defending the valuation methodology for the cattle stations.

BDO Kendalls Corporate Finance director Steven Sorbello said that asset-based valuation was relevant and appropriate and dismissed calls for BDO to apply discounted cash-flow and capitalisation of maintainable earnings methodologies.

Several weeks ago AACo chief executive Stephen Toms told Business Spectator that the transaction was above board and had not been opposed by shareholders. "I haven't had any shareholder contact me with a negative view on the transaction,” Toms said.

Yet it was certainly the opinion of other shareholders besides IFFCO that Tipperary and Litchfield were bad deals for shareholders. Corporate governance consultancy Risk Metrics, which recently played a starring role in the non-carried vote against Rio Tinto director Sir Rod Eddington, advised to holders of approximately 10 per cent of AACo's voting shares that they should vote against the acquisitions.

One can assume that the ASX saw something potentially problematic in the acquisitions too, having ruled last month that the acquisitions should go to a shareholder vote (AACo's northern exposure, March 11).

Shareholders may soon get to express their displeasure with the arrangement once again at the company's annual general meeting on May 27. Three directors – chairman Charles Bright, Philip Toyne and Brett Heading – will be up for re-election and three new candidates have been put forward. They are IFFCO's Paliulis, Burton-Taylor and Chris Roberts, the chairman of Amcor and a former director of AACo.

Last week AACo appointed two new independent non-executive directors, Peter Hughes and Stephen Lonie. Hughes is the managing partner of Hughes Pastoral Company, while Lonie is the former managing partner of KPMG Queensland, who has previously advised AACo, plus companies such as Stanbroke Pastoral and Darling Downs Bacon Co-Operative.

AACo could not comment on what would become of Allan Myers' proposed investment, considering that it hinged on Tipperary and Litchfield. The ball is in Myers' court, but the clock is ticking; Futuris has said it wants to get out of AACo for good by the end of June.

It's all back to the drawing board then for Tim Crommelin and Sophie Mitchell at ABN Amro Morgans in Brisbane, who have been advising AACo. More work too for Peter Hunt and Michael Harrison from Caliburn, and Matthew Stubbs from Citi, who are meanwhile advising Futuris on its options.

In addition to BDO Kendalls on the expert's report, a legal team from Mallesons Stephen Jaques led by John Humphrey has also been advising AACo on corporate matters, while Brisbane legal firm McCullough Robertson has been advising on the property transactions.