Computershare sale to chairman blast from past

Ah, how the fond memories have flooded back. In days of yore, the related-party transactions used to flow thick and fast.

Not these days, though - these boring days of goody two-shoes directors and their suffocating corporate governance strictures.

We were rudely forced to rack our brain just to recall the last good old-fashioned, red-blooded asset sale straight from an ASX Top 100 company to its chairman or chief executive.

OK, there was Rupert Murdoch's News Corp buying his daughter's TV production company for $US673 million a couple of years back. But that's Murdoch. Elsewhere, things have been quite subdued on the related-party front since the halcyon days of Macquarie, Babcock and Allco.

In any case, now that executive pay in Australia is so "globally competitive" - benchmarked against the universe of Wall Street - and one can deal oneself in for a handsome sheaf of options and bonuses, why bother selling oneself the company assets as well?

And so we move to Computershare, where our hearts were truly warmed to see its chairman and founder, Chris Morris, buy a business this week from ... Computershare. Such nonchalance.

Auditor PricewaterhouseCoopers had valued this business, IML, in the Computershare accounts at $US51 million ($55.8 million). But it was sold for just $US12 million. "Financially challenged", apparently. It was sold to a company called Lumi, the word for snow in Finland, where much of its operations are based. Morris is the largest Lumi shareholder with 44 per cent.

IML provides interactive devices for people to vote at annual general meetings. Morris had overseen the acquisition in late 2005 for £20 million. Computershare then spent money adding to the business but, alas, the technology was soon rendered passe by things such as mobile apps and tablets.

It's a good thing for Lumi, and Morris too, that Computershare awarded IML some multi-year contracts before the sale was made. That will keep the wolves from the door.

Things may be a tad stiff, however, at Commonwealth Bank's broking lunch in Melbourne on Monday. Hosting the nosh-up, to showcase Computershare's financial results, is none other than CBA banking analyst Ross Curran.

It was Curran who identified the related-party transaction in a report to clients last week, noting: "We are very uncomfortable with the IML transaction."

As far as analyst reports go, this is fiery, revolutionary language. "Concern over lack of optimal visibility in regards to divestment of UK interactive events technology platform" is usually as brave as they get.

Computershare chief executive Stuart Crosby hosed things down by pointing out that, besides Morris' company, there were 11 other bidders for the asset. They were privy to the Computershare contracts awarded to IML, he said. And the process was run by an independent British merchant bank, Clarity, with Morris abstaining from all deliberations.

Questioned by Curran at the analyst briefing on Thursday, Computershare's CEO said "it was not clear at the time the transaction was being undertaken that Lumi was a related party".

Curran: "Can you give us a feel for the value of the contracts that are outstanding between Lumi and CPU [Computershare]?"

Crosby: "I do not know at the top of my head. They are, however, pretty much all activity-driven ... so, they're really not a fixed dollar price, they are simply commercial arrangements."

Curran: "And how many years are you locked into this deal with Lumi?"

Crosby: "I think I would characterise it [as] how many years have we locked in access to the technology that we sold to their clients. And I think it's generally three."

The aroma wafting above the IML deal may drift away but challenges remain for Crosby and his team. Until now, Computershare has done superbly in fending off the threat of the internet to its registry business. And the other cash cow, the "margin" operation, for that matter.

This is where the company parks money arriving from share placements and so forth and clips the ticket. It earns a bit over $100 million per half-year on deposits of $13 billion or so.

This is a market transactions game - volume sensitive - yet the digital world must also pose some menace to the simple task of parking shareholder funds on deposit.