Article in this mornings AFR: Dreamworld owner Ardent Leisure is...

Article in this mornings AFR:

Dreamworld owner Ardent Leisure is the latest company to find itself on the receiving end of criticism from a small but powerful group of shareholders who want a direct say in how their investment is being run.
There have been a lot of consultants and bankers warning Australian boards for years to brace for a wave of American-style shareholder activism. The wave is more of a ripple than the tsunami many predicted but it is becoming increasingly clear that investors will no longer tolerate under-performing boards or management.
Ardent joins BHP Billiton, Investa Office Fund and financial adviser Praemium making headlines over the past fortnight as their shareholders go head to head with management. Brickworks and Soul Pattinson have been in the Federal Court this week as fund manager Perpetual pursues its long-running campaign to unwind the cross-shareholding structure between the two companies.
Ardent was always going to be a soft target after badly mismanaging its response to an accident last October that killed four people at its Dreamworld theme park on the Gold Coast. The company has never recovered.

Chief executive Deborah Thomas announced in April she would step down into a more junior role and the company downgraded its earnings forecasts earlier this month. The company has lost a third of its market value since the Dreamworld accident, but at $2.08 per share has recovered from its March low of $1.56.

Ardent knew is was in for a shake-up when corporate raider Gary Weiss' investment vehicle Ariadne first appeared on the register in March. Ariadne and Kayaal Trust now own 7.9 per cent of the company.
Ariadne demands

Weiss and Queensland property rich lister Kevin Seymour are demanding a seat on the board. Weiss is also backed by Ariadne chairman David Baffsky, who also has his hands full in his other role as chairman of Investa Property Group. Investa is in battle with major stakeholder and takeover suitor Cromwell.
Weiss is an old hand at this kind of thing after working for Ron Brierley's Industrial Equity, which terrified boardrooms in the 1980s, led a push for a restructure at Perpetual in 2012, and sits on the board of Solomon Lew's Premier Investments.

Weiss and his advisers at Investec have been quietly reviewing Ardent's operations and have raised concerns about the company' strategy to invest heavily in the US and the under-utilisation of the Queensland property assets. Their research has identified unlocked value in the company.
Ardent said this month its theme parks visitor numbers and revenue fell by more than a third in February and March and forecast a $4 million full-year loss. They are also worried about the performance of its Main Event Entertainment leisure centre operations in the US, which reported a 2.9 per cent fall in same-store sales in the six months to December.
They have also raised corporate governance concerns around the process which led to the sudden appointment of Simon Kelly as chief executive and why Thomas keeps her board seat when she moves into a new role with the company in July.
In what looked like a pre-emptive strike to head off Weiss and his supporters, Ardent told the market on Wednesday that It was reviewing its Main Event business as well as the Dreamworld property precinct. There was no mention of this when the company made a trading update in April. Ardent also said on Wednesday it was planning to appoint at least one US director and was considering the request to appoint Weiss and Seymour to the board.

Agitators surprised

The announcement to the stock exchange took the agitators by surprise as they were never given a heads-up, even though it was in response to their campaign. Ardent can argue it was adhering to good corporate governance, which means all shareholders had to be informed at the same time.
It said it initiated the Dreamworld review early this year and hired L.E.K. Consulting in April to look at Main Event. Ardent did not say if that took place before or after it knew Weiss was buying stock in the company.
The company is taking the request for board seats seriously and plans to meet Weiss and Seymour next week. There are other, bigger shareholders in the company such as Fidelity and Ausbil who do not have board seats, although Weiss and Seymour are not unqualified for the job. They argue Ardent needs directors with skin in the game.

The re-emergence of Weiss in a potential activist situation means Ardent has a battle on its hands whether it likes it or not. The Dreamworld tragedy has been a major distraction for the company, which meant the reviews now under way are taking place later than they should have. The weak share price and management change meant it was the perfect time for Ariadne to strike.
BHP has become the target of an aggressive campaign by New York hedge fund Elliott, which last week made a fresh assault on the miner.
Shareholder activism in Australia in the past has been confined to a handful of players, but super funds and mainstream investors are starting to pay attention.