(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
By Quentin Webb HONG KONG, Dec 22 (Reuters Breakingviews) - After semi-successfully storming the shores of Japan, pushy investors are due for a Pacific cruise in 2018. A recent campaign by Paul Singer's Elliott Management at BHP (BHP)
, the mining colossus, and a separate skirmish between a local billionaire and Myer (MYR), the department-store chain, set the stage for a pick-up in hostilities Down Under. The market offers enticing targets, shareholder-friendly rules, and potentially supportive fund managers. While Australia has a clutch of home-grown aggressors, such as Sandon Capital, they have tended to focus on smaller companies. A 2016 report from Activist Insight found only 4 percent of campaigns from 2013 onwards had targeted large-cap stocks.
That alone should mean more untapped opportunities than in other developed markets, where activists have spent years picking over targets big and small. And while other Asia-Pacific spots, including South Korea, are opening up thanks to new corporate-governance and stewardship codes, they pose bigger logistical and cultural challenges for Anglophone managers. In mid-2017, FTI Consulting rated Australia’s “activism threat level” at 9.5 out of 10 – second only to the United States.
There are three other reasons to suspect contentious activity will pick up. First, there are good candidates, namely cheap-looking stocks that could streamline their portfolios and hand back cash to shareholders. Credit Suisse strategist Hasan Tevfik has zeroed in on AMP (AMP), Caltex (CTX), CSR (CSR), Fletcher Building (FBU), Lendlease (LLC) and News Corp
, among others. Second, shareholders have powerful levers to pull. The battle between Australian tycoon Solomon Lew and $500 million Myer underscores a particularly tough “two strikes” rule on pay. If a quarter of voted shares oppose the company's stance on executive pay two years running, it kicks off a potential “board spill” that puts all directors up for election. Another provision allows any 5 percent owner to call an extraordinary general meeting.
Finally, a solid campaign from afar could find local backing. Australia is rather clubby, with the same directors popping up on board after board. At the same time, the country also has a robust financial press that can amplify attacks on bad practices. And stock ownership is dominated by institutional money, particularly local pension funds, which should be open to value-creating ideas. All of that gives activists a reason to drop anchor.
On Twitter http//twitter.com/qtwebb
CONTEXT NEWS - Myer suffered an investor rebellion over pay at its annual meeting on Nov. 24, with more than 29 percent of votes cast opposing the Australian department store chain’s remuneration report. This is the section of the annual report that details a company's policy on executive pay and bonuses.
- If next year’s report is also opposed by at least 25 percent of votes cast, Myer’s directors could be at risk under Australia’s so-called “two-strikes” rule.
- For that to happen, a simple majority of votes cast would need to support a “board spill” motion. The board would then be forced to stand for re-election at a follow-on meeting held within 90 days.
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<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ BREAKINGVIEWS - BHP should take Elliott’s activism as acompliment BREAKINGVIEWS - Korea scandal shows risk of pension giant
BREAKINGVIEWS - Japan has long road to black-belt in governance Australia's Myer billionaire shareholder leads revolt against board Changes in chaebol governance culture could diminish the 'Korea discount' FTI activism report http://fticommunications.com/2017/07/global-activism-rise-2017-update/ Myer statement http://investor.myer.com.au/DownloadFile.axd?file=/Report/ComNews/20171124/01925849.pdf
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