FOSTER'S shareholders showed no jubilation about the company's $12 billion takeover by global brewer SABMiller yesterday, choosing instead to flay directors for selling out while almost scuttling $5.2 million in performance rights for the new chief executive, John Pollaers.
In what will most likely be the final annual meeting for the Australian beer group, vocal and sometimes emotional shareholders cheered and heckled from their seats as the chairman, David Crawford, tried to explain the reasons for accepting SABMiller's bid.
One investor was brought to tears about the public demise of Foster's and others attacked the thinking of larger shareholders such as superannuation funds for supporting the bid to make a quick return.
At times calling the board disgraceful for their decision to sell the company and yelling abuse from back of the hall, investors exacted revenge on directors by almost voting down two motions that sought to award long-term incentive stock to Mr Pollaers.
Many questioned if directors had the confidence to run Foster's as an independent company, and argued the bid from SABMiller in September, priced at $5.5325 a share, greatly undervalued the long-term value of the group and its beer assets. The bid has the full support of the board. Shareholders vote on the deal later this year.
Feeding into the general mood of revolt among Australian shareholders against pay and bonuses for executives in public companies this reporting season, investors channelled their collective anger into the bonuses proposed for Mr Pollaers.
The first item relating to his share bonus recorded a 41.8 per cent "against" vote, with 56.6 per cent in favour. The second motion went just as badly, with displeased shareholders voting 42 per cent "against" and 56.4 per cent in favour.
If SABMiller's takeover of Foster's is successful, as is expected, 100 per cent of Mr Pollaer's performance rights for the 2011 incentive plan will vest, giving him 480,044 shares.
Only 50 per cent of the second tranche of stock for the 2012 year, also consisting of 480,044 rights, will go to Mr Pollaers if the company is taken over with the remaining performance shares extinguished.
Mr Crawford said such performance rights were required in times of ownership uncertainty to ensure the chief executive remained with the company. Mr Crawford also said Mr Pollaers was not awarded shares when he became chief executive.
After the meeting, Mr Crawford told reporters he was more focused on the 88 per cent support garnered from shareholders for the remuneration report, which he described as "incredibly significant" in the current environment where many companies were facing strong "no" votes on the contentious AGM item.
"I think the key vote is the remuneration report it's the remuneration report that has been the substance of comment, criticism, review, reflection by investors etc, so the remuneration report is what everyone should be focusing on and that is what I believe is the most important."
Frequently Asked Questions about this Article…
What happened at Foster's AGM after SABMiller's $12 billion takeover bid?
Shareholders showed little celebration and instead voiced strong anger at the board's decision to accept SABMiller's $12 billion bid. There were cheers, heckling and emotional scenes as chairman David Crawford explained the reasons for backing the offer. A formal shareholder vote on the deal is scheduled for later in the year, and the takeover was described in the article as widely expected to succeed.
Why did investors say the SABMiller bid of $5.5325 a share undervalued Foster's?
Many shareholders argued the $5.5325-per-share offer from SABMiller greatly undervalued Foster's long-term beer assets and future potential. Some investors also criticised large institutional holders, such as super funds, for supporting the bid to secure a quick return rather than holding out for greater long-term value.
What was the shareholder reaction to John Pollaers' $5.2 million performance rights package?
Investors channelled widespread anger about executive pay into votes on Mr Pollaers' proposed performance rights. Two motions to award long-term incentive stock to Pollaers narrowly passed but attracted large “against” votes: the first recorded 41.8% against (56.6% in favour) and the second 42% against (56.4% in favour).
If the takeover succeeds, how will John Pollaers' performance rights vest?
According to the plan described in the article, if the takeover is successful 100% of Pollaers' 2011 performance rights will vest, giving him 480,044 shares. For the 2012 tranche (also 480,044 rights), only 50% would vest on takeover and the remaining performance shares would be extinguished.
Why did Foster's directors say the performance rights were necessary?
Chairman David Crawford said performance rights were needed during a period of ownership uncertainty to help ensure the chief executive stayed with the company through the takeover process. He also noted Pollaers was not awarded shares when he became CEO.
How did the company fare on the overall remuneration report vote?
Despite the controversy over Pollaers' bonuses, the overall remuneration report received strong shareholder backing, with 88% support — a result the chairman described as 'incredibly significant' given a wider trend of strong 'no' votes at other companies' AGMs.
Will shareholders still vote on the SABMiller takeover and when?
Yes. The article states shareholders will vote on the SABMiller takeover later in the year. The board had given full support to the bid and was explaining its reasons to investors at the AGM.
What does the Foster's AGM reveal about broader shareholder sentiment on executive pay in Australia?
The AGM reflects a wider revolt among Australian shareholders during that reporting season against executive pay and bonuses. Investors used the meeting to express collective anger about pay, targeting the proposed bonuses for Mr Pollaers as part of that broader sentiment.
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