06/08/2009 - 00:00

‘Accidental’ shareholder takes aim at Khan

06/08/2009 - 00:00


Save articles for future reference.

An elderly investor is testing Farooq Khan’s hold over Bentley Capital.

‘Accidental’ shareholder takes aim at Khan

PERTH-BASED entrepreneur Farooq Khan is in an unusual position. The corporate raider is under attack.

And the threat comes from a 70-year-old semi-retired shareholder who owns a motel in Frankston, Victoria.

On the surface, a general meeting scheduled for late this week in Sydney appears to be nothing more than a shareholder dispute at a little-known investment company called Bentley Capital. But in reality, the dissident Melbourne shareholder is testing Mr Khan's hold over a swag of companies.

Mr Khan, born in Perth, 1961, is a corporate lawyer who earns an annual base salary of roughly $900,000 as a director on the board of several public companies.

He picked up, or at the very least crystallised his reputation as a corporate raider in the dot.com days, after establishing a record of consuming troubled companies with substantial cash reserves.

One observer who watched Mr Khan's ultimately unsuccessful tilt at biotech company, Biota, in 2003 said the Perth entrepreneur would "fight like crazy" to protect his interests in Bentley.

By tracking the interests of the companies Mr Khan is a director at, WA Business News believes his power stems from an investment currently worth about $600,000 in a failed dot.com turned holding company, Queste Communications, where he is the managing director and second largest shareholder.

As presented in the table, Mr Khan appears to have secured directorships at several linked firms - including Perth-based Strike Resources - which are ultimately controlled or influenced by Quest-controlled Orion Equities.

One person with knowledge of the situation said the companies appeared to be shoring up each other's positions, although Mr Khan said the suggestion was nonsense. He said the infrequent number of trades between the companies didn't support the allegation.

The Melbourne shareholder, Michael Barnett, is an accidental owner of a 6 per cent stake in listed investment company Bentley. He originally invested in Rivkin Financial Services, previously run by the extravagant, and now deceased, Rene Rivkin.

Through a series of mergers, Rivkin Financial shareholders have become stakeholders in Bentley, where Mr Khan is chairman. The semi-retired motel owner said he was unimpressed with the company's investment strategy, which is to outsource the management of its assets to a fund manager.

"The people who are running it aren't doing anything in my opinion," Mr Barnett said. "They are just taking fees and the company isn't paying dividends."

With a 6 per cent stake, Mr Barnett was able to call a general meeting in a bid to oust Mr Khan and director William Johnson, who also appears on a couple of other linked boards alongside the Perth entrepreneur.

Mr Khan said listed investment companies that paid dividends during the crisis used capital rather than profits, and that Bentley had performed relatively well in a tough market.

To topple Messrs Khan and Johnson, Mr Barnett (with a 6 per cent holding) needs to overcome Orion's 28 per cent stake, which is effectively controlled by Mr Khan. Messrs Khan and Johnson are both directors at Orion.

But the task is not impossible. A well-known figure in financial circles, Geoff Wilson of Wilson Asset Management, has already publicly criticised Mr Khan.

He holds a 5 per cent stake and plans to vote with the Melbourne shareholder.

WA Business News has spoken to other people supporting Mr Barnett, who are confident that, one way or the other, they'll get Bentley wound up and have the capital returned to shareholders, which is the end goal.

They are prepared for a drawn-out battle should this week's coup fail, as is, presumably, Mr Khan.

Mr Khan said the listed investment company had just gone through a merger and had an investment mandate recently approved by shareholders.

"We think we should be allowed to get on with it," Mr Khan said.

"If they are absolutely wanting the cash they should put in a winding-up resolution."

The Bentley defence has already commenced, with Mr Barnett confirming an un-named Bentley director approached him, offering to buy-out his stake at a "substantial premium". But Mr Barnett said he was standing by his fellow shareholders who wanted change.

Other shareholders, such as investment companies, have a mandate to act in the best interests of their own shareholders, and could conceivably be persuaded to sell out.

A stakeholder who is very close to proceedings said Bentley was the weakest link in Mr Khan's chain, so that's where they targeted an attack.

"When the stairs are dirty you start sweeping at the top," the stakeholder said, referring to the sought-after removal of Mr Kahn.

The stakeholder said the revolt could and should spur other shareholders into action, targeting other parts of the chain that could be run more efficiently.

The hunter has become the hunted.


Subscription Options