01 May Major Southern Cross Media investor pushes for chairman to be dumped
Source: The Financial Review
A major shareholder in Southern Cross Media has demanded the removal of the company’s chairman and two directors in a move that could pave the way for billionaire businessman Kerry Stokes’ former right-hand man, Bruce McWilliam, to take a seat on the board.
Southern Cross took over Seven West Media this year in a controversial deal to form a new media group – it owns Network Seven, the Triple M and Hit radio networks, the Listnr app and West Australian Newspapers.
It was a significant moment in the media industry, which led to Stokes stepping down as Seven West chairman after more than 15 years. It was believed to represent the end of his iron grip over the Seven assets.
His influence, however, may not have waned as much as first expected.
Sandon Capital, a high-profile activist fund manager, on Friday afternoon lodged a request for a vote to remove directors including Southern Cross chairman Heith Mackay-Cruise. Sandon chief investment officer Gabriel Radzyminski said the firm wanted two other directors off also: entrepreneur Ido Leffler and former journalist and media executive Marina Go.
Southern Cross was contacted for comment.
Sandon owns 5.5 per cent of Southern Cross and bought in before the takeover, which Radzyminski opposed. The structure of the takeover meant only Seven West shareholders had to approve it, and Stokes’ 40 per cent holding virtually guaranteed it would happen.
“We vigorously opposed the merger when it was first proposed, right through to the end, and, in fact, we tried to change the constitution. This is a continuation of our campaign from last year. The directors who entered into the transaction are those we are seeking to move,” Radzyminski said.
“Our application is targeted towards those who approved the merger from the Southern Cross side. We have no issues with the Seven West directors. They simply accepted an offer that was too good to refuse … the market has voted – just look at the share price, it’s appalling.”
The combined value of Southern Cross and Seven West was more than $430 million before the merger. The company’s value has since plunged to $282 million. Radzyminski said that the “shareholder dynamics have changed” since his last effort to remove Southern Cross directors.
Another activist investor, Samuel Terry Asset Management, now holds 6.2 per cent, while Spheria Asset Management was forced to sell down to a – still influential – 10.3 per cent holding.
It sold some of its stake to McWilliam, who spent $14 million last month to acquire 5.3 per cent of the company. The former Seven West commercial director and loyal lieutenant to Stokes has been canvassing shareholders to buy much more, and has made known his wish to join the company’s board, possibly as chairman, according to multiple people with knowledge of his plans, who asked for anonymity to talk openly.
Currently, the company’s depressed share price has prevented him from gaining more.
Radzyminski declined to comment on McWilliam, but said the change in shareholder register “might mean that shareholders are open to a different way forward”. “Our view is when you make changes to board, management changes follow,” he said.
Mackay-Cruise wasted no time seizing control of the newly combined entity. He abruptly axed the combined company’s chief executive, Jeff Howard, weeks after the deal was closed, taking the executive chairman role.
He cut duplicate executive roles, mostly from the Seven West side, and was blunt with staff about the change required for the company to improve its bottom line. Last week, he announced ex-NRMA chief Rohan Lund would take over as chief executive of Southern Cross.
But the potential shake-up of the Southern Cross board has fuelled speculation Stokes, who banked a $180 million tax gain from the structure of the takeover, is taking back control of the company – at a fraction of the price. McWilliam has previously said the shares were just “a good price”.
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