Crunch time looming in Kresta crisis

A SIMMERING feud between Kresta Holdings chairman Ian Trahar and the company’s major shareholder Hunter Hall will come to a head next month, when shareholders will be asked to choose between two sets of directors.

Last week, Mr Trahar and fellow director Peter Hatfull accused 19.7 per cent shareholder Hunter Hall of trying to gain control of the window treatment retailer company without paying a premium.

They were responding to moves by Hunter Hall to oust them from the board and replace them with new directors, Richard Taylor and John Molloy.

Shareholders will decide the issue next Monday, when a general meeting requisitioned by Hunter Hall will be held.

The dispute between Mr Trahar, who joined the Kresta board in February last year, and Hunter Hall, which has been a shareholder since 1996, became public at the company’s annual meeting in November.

Mr Trahar used that occasion to oppose the election of Mr Taylor to the board of directors.

Hunter Hall says it wants changes to the board because of the company’s poor financial and share price performance since Mr Trahar was appointed chairman in June.

At the AGM, the company announced earnings were down around 50 per cent for the first quarter of FY11. It disclosed recently that the poor earnings trend has continued to November.

The current board says it shares Hunter Hall’s concerns with respect to the decline in earnings and has been proactive in addressing serious issues in the company’s systems and processes.

It also believes that there has been an underinvestment in product development, training and information technology, which has left the business vulnerable to any downturn in consumer spending and increased competitive activity.

The current board argues that Hunter Hall is using selective and misleading information in a bid to seize control of the company.

It believes the problems stem from the policies of former chief executive Tass Zorbas, who retired in September.

Hunter Hall has also argued that Mr Trahar wants to merge his private electrical business Arlec with Kresta.

Mr Trahar said he advised the board in September he did not wish to proceed with the Arlec transaction, and the board formally resolved then not to proceed.

Capricorn Society chief executive Trent Bartlett, who is the only Kresta director who Hunter Hall wants to retain, supports the incumbent board.

“In my view, it is not appropriate for Hunter Hall, a shareholder with less than 20 per cent of Kresta’s shares, to achieve effective control of the Kresta board in this way,” Mr Bartlett said in a letter to shareholders.

“As an independent director and the only director who Hunter Hall is not seeking to remove, I wish to advise that I strongly support the retention of Ian Trahar and Peter Hatfull as directors and I recommend that shareholder vote ‘no’ to all of the resolutions.”

In memos sent to shareholders, the two camps have painted very different pictures of the board candidates.

Mr Taylor was a partner of accounting firm Deloitte until 2008, but Mr Trahar has highlighted his role as founder and chairman of Fluorotechnics, the share price of which has collapsed, leading to its suspension from trading on the ASX since September 2010.

Similarly, Mr Molloy has run successful advertising agency Workhouse but was also on the board of Odourless Toilet Technologies Pty Ltd, which went into administration in 2001. Mr Trahar believes Hunter Hall is trying to install directors with “limited” corporate experience.

Shareholders will vote on the bid at an extraordinary meeting on February 14.