re: Ann: Despatch of Explanatory Booklet and ... Interesting...

re: Ann: Despatch of Explanatory Booklet and ... Interesting Article

Unlocking Foster's secrets

Robert Gottliebsen

Published 8:08 AM, 4 Nov 2011 Last update 10:15 AM, 4 Nov 2011
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As the takeover community debates whether Foster’s should have let its shareholders know they could be foregoing a potential yield of 7 per cent in accepting the SABMiller bid, a wider issue has emerged (Foster's hidden treasure, November 3).

Should Foster’s have disclosed its 2011-12 budgets in the takeover documents? Foster’s directors believed that shareholders should make their decision without knowing what was in the budgets.

In fairness to the directors, they would have been scared of the potential personal liability if they released a forecast in the form of a budget and then at year’s end found that trading results were below budget.

While I can understand that view, it is bizarre that the independent investigator has to rustle up broker forecasts of Foster’s profits and then – buried in the back of the takeover documents – reveal that these broker forecasts were close to what the Foster’s board is forecasting for 2011-12. The brokers predict another big profit rise in 2012-13. Grant Samuel does not appear to comment on whether this forecast is also in line with management forecasts.

Unless Foster’s shareholders read every word of the enormous takeover package, they would not have realised the significance of the 2011-12 broker forecasts but nevertheless, Grant Samuel must be given praise for discovering a way around the board budget blockage.

I believe that it is outrageous that management budgets should be concealed from shareholders in a takeover like this one. If the law needs to be changed to protect directors then it should be changed.

Maybe ASIC can come up with a form of words that protects directors who release budgets in good faith and with all the necessary qualifications.

Many of the institutions in the takeover community say all that matters is that the bid is above the market and disclosure of yield and forward budgets only complicates the issue and gives them unnecessary reading. I happen to believe that it does matter and if shareholders are being asked to sell Foster’s shares in a cash takeover bid they should have the very best information that is available, even though it’s of no interest to many institutions.

Maybe a time will come when those institutions will take the issue of managing Australian superannuation funds seriously and actually look at what is happening in the companies that they are buying and selling rather than simply thinking about short-term returns.

Meanwhile, Foster’s directors should consider sending out new documents that reveal the yield that arises from Foster’s distributable cash surplus plus budgets for the next two years and a clear trading update, so non-institutional shareholders can make a proper decision.