AGC vs CBH - What the?

So now Australian Grain Champions are declaring they're not going away.

They're declaring their surveys show an overwhelming support for their actions and possible future bids.

CBH surveys 1000 growers and that shows an overwhelming support for the Co-Operative model.

AGC's contentions now are as follows...(from their website back in March 2016)

1) "The decision by the CBH Board to reject our Proposal, without giving you the chance to consider it, was extraordinary."

 

Well no it wasn't really, the board did what they board was elected to do. I find it extraordinary a hostile take over would suggest the board doesn't make decisions, the share holders do. Why does the board have board meetings and yearly there is the member's meeting called the AGM?

Boards and specifically the directors have what's referred to in the Corporations Act as a "fiduciary duty" to operate in the best interests of the shareholders at all times. Its a grave transgression to do otherwise and directors are personally responsible both legally and financially if they fail to do so. You can expect them to do so, if not throw them out at an AGM or contact ASIC. I notice AGC did neither, because they lacked the numbers for an extraordinary AGM and had no proof of any breaches of the Corporations Act, although its almost looks like a veiled inference that way at times.

 

2) "Effectively, the 12 directors have acted as censors-in-chief, keeping you and the 4000 other owners of CBH in the dark, blocking your right to review the Proposal in detail and an honest discussion of it. This should be your decision to make – not the Board’s."

Well no, that's actually quite incorrect and very mischievous in my opinion.

If somehow AGC thinks the board has breached the Corporations Act, they should cite chapter & verse where, when and how and lodge a complaint with the federal regulator of directors, ASIC.

Make up your mind and either lodge a complaint or take down the accusation/inference.

 

 

3) Instead, the CBH Board says it is commencing a long-winded “consultation process” on CBH’s future that will take six months to produce an “interim” report. This process will inevitably deliver more of the same and cost you a lot of money.
This is not good enough. The Board has had years to work on these issues.

 

With legal and financial advisors CBH would have had to employ, there's a big cost. There's a lot to the cost & effort in assessing the Take Over Bid, not to mention extra board & management hours logged and the large amount of lost productivity from middle and senior staff. The Board has not had years to deal with "these issues" because their current new issue at the time was assessing a take over.
 

There was 2 aspects seemingly overlooked, hidden or not understood by AGC.

Due Diligence and Due Process.

If the board has not performed properly, again, it has failed in its fiduciary duty and the board should be reported to ASIC with a full list of breaches and legal action should commence.

Why has AGC not done this? And if the offer was accepted, would any accusations/inferences over the board's performance and/or failures been even mentioned? Nope sour grapes is the new sponsored drink during unhappy hour.

Make up your mind and either lodge a complaint or take down the accusation/inference

 

4)Australian Grains Champion has a well-developed Proposal that is ready for implementation now.

 

I'm sure it was deemed ready for implementation but it was presented and AGC fired shots at the board before it had even given its final decision. Why is that?

Is that how you're supposed to act when making a proposal? Highly unprofessional.

Ready for implementation, but it seems it was a poorly thought out plan and well below the best interests of the members. Think otherwise?

Make up your mind and either lodge a complaint with ASIC or take down the accusation/inference.

5) It is the only Proposal that is real, backed by Australian money, provides for significant grower control and is unlikely to be duplicated.

 

Of course its real, it wasn't a hologram but a hologram probably has more depth. One key entity involved was GrainCorp which is a financially stressed listed company. Remember that, its a "corporatised grain handler". How bad a shape is it in?

Pretty bad. Its P/E Ratio is 60 which is close to basket case. Its dividend policy is to return to its shareholders between 20 & 60% of after tax profits, yet it can still only manage a Dividend Yield of 1.17%. Now if that isn't a sad picture of a pubic listed company that serves as a cautionary tale, please remember GrainCorp recently survived a proper take over from USA giant ADM, only failed because the federal treasurer stepped in. But remember ADM is a not a majority shareholder, but it is a major shareholder with a Nominee Director on the GrainCorp board so their push for a take over of a very good grain handler like CBH would be gigantic net dollar gain for GrainCorp and ADM.

You bet GrainCorp want a slice. Its probably its best chance at a life line before their already disgruntled shareholders go to their AGM and push for proper financial reform and deliver proper returns via dividends or wind the company up. If I was on GrainCorp board I'd push for a CBH takeover but then I'd be putting dividends on hold until the company is turned around and if that wasn't accepted I'd resign.

Proposal was real, poorly put together, poorly explained and...well all round poor or CBH board would have snapped it up.

So, did CBH board failed fiduciary duty when they knocked back the deal? Well...

Make up your mind and either lodge a complaint with ASIC or take down the accusation/inference.

6) We have spent the past few weeks on the road talking to hundreds of growers like you. There is strong and growing support to see and discuss our Proposal to unlock the value in CBH and to set it up to meet future challenges.

As it turns out by their own admission AGC surveyed 500 growers and although they haven't issued the numbers in favour, they said it was overwhelming. Maybe perhaps time to be consistent with strategy AGC wishes to impose on CBH...release all the actual numbers in the survey and let all growers decide not the AGC board. I'm kidding, but in light of the poor performance of AGC on a number of levels already I wouldn't be buying if they were selling shares in God.

FWIW if growers want to see your proposal, show it in all its detail.

One question unlock the value...unlock it to whom? Yep, we'll get to that.

No, we'll get to that now with some of the other abyss size flaws.

1. AGC you have 5 directors. Who is the Chairman?
    
2. Do all 5 own equal shares or is it 3 owners with 2 independent directors to offer financial skills and legal skills? Are there more shareholders in AGC you haven't told us about? How many shareholders are there? Can anyone buy into AGC? Its just there maybe a take over bid and if you can open all your books fully we can assess what we think we can offer before we take you're outfit to a new unprecedented level. C'mon...no need for shyness now ;-)
    
3. Is AGC really a Jones/Middleton/Michael private company that has embarked on an ambitious take over bid of a WA Co-Operative that is probably the biggest Co-Op in the country by capitalisation and by profit? In reality are three families looking to knock the ownership out into a public listing or do we have Shadow Directors and undeclared shareholders? You don't have to answer.
    
4. When you're done there, please explain fully your proposal to the extent that if the deal was accepted how much were each AGC directors set to personally make out of the deal (Sorry I meant out of CBH coffers, growers money, get it?)...in dollars and how much each share holder would have made? Not in receipts from converted shares but in fees and charges paid to AGC.
    
5. This of interest "provides for significant grower control" - Just how? If you publicly list the company its open to non grower ownership. If you need to expand and invest in different  enterprises, you will have to raise capital...release new shares. More dilution of the grower ownership. THE ONLY WAY to maintain grower control is to make sure its only ever owned by growers. Co-Operative does that, but that's not what AGC said. They said "SIGNIFICANT grower control" - Clancey Michael described it as a "Wesfarmers moment". Do growers have control of Wesfarmers? They sold off the Agriculture Arm of the business...will AGC's CBH do the same or definitely not.
    

Lastly the big killer, its up there with the well made but vacuous videos they've been releasing which are well filmed thought bubble devoid of actual facts and explanations. Yes there is a recent move from AGC that rings the bell that's covered in red flags.

In the last few days AGC have been critical of the CBH board for not furnishing them with a good and proper look at the books.

Ummm...how does that work?

A hostile take over wants access to all financials of the company, across all the business...from the board?

Do you want all commercially sensitive information as well?

Seriously here's where I have the biggest and most serious concerns about AGC...and their ability to know what the dickens they're doing.

If you cannot look at the Annual Report, recast the entire company financials using...no I'm not going to mention the tools to be used, but if you cannot recast the financials to find the weaknesses and strengths of the business, and determine exactly where they are then I don't think you're suitably positioned to help strengthen a newly listed company, let alone forge its new future.

This might not be something that should be a news flash.
AGC hitched its wagon to GrainCorp with a P/E ration of 60.

Everyone will look at a 60 P/E maybe a little differently but ask 5 share market investors, day traders or even stock brokers. I'd lay a bet at least one with come up with comments that include the words "financially toxic" or similar.

• What's coming out of AGC concerns me and others.
• They're not saying things that automatically suggest they know a board's rights, role and responsibilities are, what director's rights, role and responsibilities are.
• They're saying things that automatically suggest AGC don't know basics like how to read and recast the Financials of CBH's Annual Report.
• They're not saying things that automatically suggest AGC know how to read and recast GrainCorp's Financials.
• They are saying things that could cause someone else not versed in Director's rights, roles and responsibilities to think the CBH board is breaching the Corporations Act.
• They're saying the board should open their books to them completely...when its a hostile take over, not an exercise of due diligence prior to making Receivers/Administrators or Liquidators a purchase offer. CBH is not is financial trouble, there is no legal requirement to open all the books up to a take over group that cannot handle recasting the Annual Financials.
• They're not saying who they are beyond the Board of five, not saying what success fees each director would earn if the deal went ahead, what portion of success fees would be shared with whoever other investors/shareholders in AGC.
• Beyond thought bubbles and poor take over offers, they're not 100% clear on the Strategic Direction which AGC prefers nor is there any reason that IF listing as a Publicly Listed Company WAS SUCH A GOOD IDEA, why would not the AGC group prefer CBH do it themselves and save a very, very significant amount of CBH's money...how is that? For a group that might like to be viewed as a progressive group of selfless, altruistic benefactors of the grains industry, seems to be a lot of cash seeking going on. Including the $16 million dollar clause they later dropped.

Personally, I'd lean towards the current CBH board knowing what they're doing but possibly, like me they're unaware and wondering what the heck AGC thinks its doing. I have no evidence of the current CBH Board doing anything else than fulfilling its legal requirements as Directors under the Corporations Act. I have no reason to suspect they've not made a good decision for the members. AND PLEASE REMEMBER if you think the CBH board is trying to maintain its golden seats and or is "political" they're ALL guilty of breaking the Corporations Act and need to be investigated and prosecuted. Not one or two, the whole board. I'm not of that mind.

It reminds me of one line of Shakespeare who recently turned 400..."it is a tale, told by an idiot. Full of sound and fury, signifying nothing."