Here's an interesting article from the ABC news website:
US investment house bringing shareholder activism to Australia By Ian Verrender Updated 1 hour 23 minutes ago
First it was hedge funds. Then came private equity. Now, American activist funds have turned their eyes to Australia.
This morning, a small Perth-based oil and gas explorer, Antares Energy, came under attack from a US investor that only recently snapped up a 5.3 per cent stake in the company.
Lone Star Value Investors has announced it will attempt to roll the board and has called for an extraordinary general meeting of shareholders to elect five new directors.
"We are seeking to call this EGM because we believe that Antares shareholders should be given the opportunity to vote to improve their board by adding five highly qualified, independent directors whose interests are fully aligned with those of all shareholders and whose experience is highly relevant and complimentary to serving board members," Lone Star head Jeffrey E Eberwein said.
In a letter to Antares shareholders, delivered to the ASX, Eberwein said the proposed new directors would have expertise in petroleum engineering , finance and capital markets which was needed to, "improve corporate governance and to create a strategic plan to enhance value for the benefit of ALL (accent included in letter) shareholders."
Antares has several prospective wells in West Texas, which have been draining the explorer of cash. In its latest quarterly report, the company had just $4.7 million of cash remaining, but had $141.5 million in available credit facilities with Macquarie.
Its share price has fluctuated wildly in recent months, plunging almost 35 per cent in February from 0.53c to 0.35c around the time of its quarterly report.
New acquisition strategies
The arrival of Lone Star heralds a new stage in mergers and acquisitions strategy in Australia, and one that could trouble regulators.
Just as James Packer's tilt at Echo Entertainment two years ago created angst, along with Gina Rinehart’s agitation at Fairfax, there has been some disquiet within the investment community at attempts to wrest control without launching a takeover bid.
Such moves deny shareholders the opportunity to sell out at a premium when control of a company changes hands.
But the practice has become widespread in the US in recent years. Veteran agitator Carl Icahn has been running a campaign against technology giant Apple, arguing for a greater return of cash to shareholders.
The New York Times recently noted that activist funds had begun teaming up with established money managers to overthrow boards and push through changes.
Wall Street heavyweight James Rossman of Lazard described the trend as, "the biggest shift in the battle for corporate control since private equity was invented in the 1980s."
Australian institutions also appear to be open to this kind of approach. A survey by proxy advisor GPS – which is advising Lone Star – found that 48 per cent of Australian investment institutions would be prepared to enlist the support of an activist investor to help push through boardroom change or influence a transaction.
Investment banker Mark Carnegie is the closest Australian equivalent to the US-style activist investors.
In recent years, Carnegie and a group of high profile investors, including former Qantas boss Geoff Dixon, attempted to ram through changes at the national flag carrier but eventually sold out.
Carnegie since has teamed up with funds manager Perpetual – along the lines of the trend now sweeping Wall Street – in an effort to unwind the interlocking shareholdings between Washington H Soul Pattinson and Brickworks that to date has met with limited success.
Carnegie clearly was ahead of the game. But it appears he may be facing competition from the original activists.
OEX Price at posting:
9.4¢ Sentiment: ST Buy Disclosure: Held
