High profile fund manager Geoff Wilson is in his element. As the second-largest shareholder in besieged department store group Myer, he has literally become the kingmaker, in whose hands the governance fate of Australia’s oldest corporate icons now rests.
The future of Myer chief executive John King’s seat on the retailer’s throne and that of the board rests with Wilson.
The title of Myer’s kingmaker is more usually ascribed to the company’s largest 11 per cent shareholder, Solomon Lew – the man who has been on a four-year mission to discredit the board for its oversight of the company’s underwhelming financial performance and deteriorating balance sheet.
Last week Lew renewed his campaign against the Myer board but this time he also called for the chief executive’s head. But Lew needs Wilson’s support.
Without it Lew would have to undertake the arduous task of writing to the thousands of small shareholders seeking their voting support at an extraordinary general meeting to topple Myer’s entire hierarchy. He might prevail but there are no guarantees nor do we know if he has the stomach to mount such a campaign.
But if Wilson joined team Lew the outcome would be a lay down misere. There would be no need to call a meeting of shareholders – the board would acquiesce and King would start packing his office plants into cardboard boxes.
Having said that the rumour mill has been in overdrive over the past week that King would not be at all devastated if he was forced out of Myer. He is said to have told friends he has grown tired of the overwhelming task of turning around the department store chain.
If true, who could blame him. Having COVID-19 interrupt Myers’ resurrection strategy has only made his task more difficult.
Meanwhile trying to get a fix on Wilson’s current position is near impossible. He has previously supported King and the Myer board – much to the chagrin of Lew.
Last Thursday when Myer released its $172 million loss, the second largest in its history, Lew let fly with his scathing assessment of its board and management, he also emptied the rest of his arsenal on Wilson.
Here is a bit of a recap on Thursday’s hailstorm of fire. “The arrogance displayed by Mr Wilson in backing [Garry Hounsell] as chairman of Myer over the wealth of retail experience in Premier is breathtaking,” Lew said.
The rumour mill has been in overdrive over the past week that King would not be at all devastated if he was forced out of Myer.
“Mr Wilson should now acknowledge that the continued failure of Myer is at least partially his own fault and his investors should hold him to account for the losses they have sustained and will continue to endure unless there is immediate change.”
Such a spray is hardly the traditional way to enlist support. Either Lew is attempting to bludgeon Wilson into supporting him or monstoring Wilson into selling out. Wilson believes the latter is more likely.
But Wilson, who has very effectively used his public profile as a marketing device, probably is taking Lew’s bait. Wilson’s immediate response to Lew’s tirade last Thursday was to make two friendly calls – one to Lew and the other to King.
It could be fence-sitting or it could be he is playing both sides.
Publicly Wilson is staying schtum. His role in determining who runs Myer has been important since he acquired a stake a few years ago. But since Anton Tagliaferro’s Investors Mutual sold its near 10 per cent stake in June, Wilson’s leverage has increased exponentially.
Needless to say Wilson has lost money on his 7 per cent stake – the average cost of which has never been clear but varies between 40 cents and 60 cents (depending on who you ask). But it is a loss of about 50 per cent given Myer currently trades at 24 cents.
(Wilson also points out that he has invested far more successfully in a range of other retail companies.)
He also says that Lew, who paid about $1.15 per share for Myer, has taken an even bigger bath on his Myer investment.
In the meantime, while Lew waits for Wilson, the billionaire rag trader will need to dusk off his list of potential candidates for the Myer board.
Source: Thanks smh.com