If it was all about money, Gina Rinehart would have her coveted board seats at publisher John Fairfax already: But splashing more cash at the Fairfax share register is not going to get the ‘iron lady’ what she wants, says Simon Marais, the mid-tier fund manager who – not for the first time – has a major role in ‘fixing’ a key corporate deal.
Marais, a South African who set up shop in Sydney as an unknown less a decade ago, is suddenly a kingmaker in Australian boardrooms. Rinehart, who has had little need in the past to court institutional investors, recently sent a delegation to Marais’s door at Allan Gray Funds Management seeking approval for her campaign to get two board seats.
But there is little evidence Rinehart has raised support from this artful 8.3 per cent Fairfax shareholder.
As all round him – including Fairfax chairman Roger Corbett – tip-toe around the key issues concerning Rinehart's effort to exploit her 12.6 per cent stake in Fairfax, Marais suggests he is not witnessing the criteria he requires to support the Rinehart board move. What’s more, as rumours circulate that Rinehart may lift her stake to press her case, Marais says bluntly that shareholding size should not be a pathway to board representation: "There are many companies where we own 20 per cent and I’m not going on the board… 20 per cent doesn’t entitle you to anything."
Says Marais: "It’s a good thing when people put their own money on the line, all other things being equal… but you have to ask, does that person have specialised skills? Will that person act in the interest of all shareholders and not the other interests which they may have?"
The comments will be exactly what Rinehart does not want to hear. Some analysts in the market have been highlighting how Rinehart has already achieved board representation at media companies with less stock than she has in Fairfax. Ten Network chairman Brian Long offered Rinehart a seat on the Ten board after she took a 10 per cent stake in the company in November 2010.
Meanwhile, Marais says Australia's legion of so-called 'active' fund managers need to do a lot more than hope management at Australia’s top companies do the right thing. His $2.5 billion equity fund is a top performing fund in its class over three years, achieving 14.6 per cent per annum, thanks in some part to 'high conviction' activist holdings.
The approach has paid off handsomely at Spotless, ING Living and other investments in recent months. Though a move by Marais to shake up management at the salmon company Tassal resulted in three directors leaving in one afternoon. At the time Marais said he was"‘gobsmacked"; though he now says "most of them probably wanted to go anyway".
More than anything else, Marais – he is, in fact Dr Marais (with an interest in theoretical physics) – has the perspective of an outsider. Asked if he thinks Rinehart will ultimately get her way at Fairfax he says: "I don’t know… what we want from her is an iron-clad undertaking that she will act in the best interests of all shareholders”.
The next formal opportunity for Rinehart to stake her claim is at the Fairfax AGM but that does not come round until November. "I guess she can put herself forward there,” he says chuckling…"but I don’t know if she will, it might not be the Australian way of doing things."