Editorial - No secrets between mates

A CORPORATE fracas is often the public version of an ugly divorce.

And that certainly appears to be the case at VRI Biomedical, where long-standing friends have had an acrimonious split in what could only be called a falling out among entrepreneurs – namely Leon Ivory, Kim Slatyer and Tony Barton. We’ll get to the detail in a minute.

What makes this particularly interesting is that the players involved have quite strong links. And what makes this particularly public is that two listed companies are involved.

The version of history that I have managed to put together is that long-time partners Leon Ivory and Kim Slatyer had a property play in the South West.

From what I recall they had plans for a commercial and residential precinct at a place called Vasse Newtown, near the tiny hamlet of Vasse between Busselton and Margaret River. Given our three-page spread last week on investment in the region, they may well have been a few years ahead of their time.

Among other things they had a tax-effective vineyard scheme called Bridgeland Estate, which failed to attract the necessary investor interest, and they had a project to attract science to their new town with a company called Vasse Research Institute Biomedical, or VRI.

Whatever happened to that South West dream is unclear but what I can tell you is that in December 2000 VRI listed on the Australian Stock Exchange, assisted by seed capital from Mr Barton’s investment vehicle Australian Heritage Group, which listed at about the same time.

The fact that Mr Ivory was invited to join the board of AHG speaks volumes for the relationships these parties had.

Just what happened between then and now is conjecture but clearly things have come to a head in the past year.

There are a few events that are clear. One was AHG’s sale in June last year of part of its holding in VRI, just two days after stockbroker DJ Carmichael put a buy recommendation on VRI stock. AHG controls Carmichaels and AHG managing director Sally Capp, a WA Business News 40under40 winner, chairs its compliance committee.

AHG denies it has done anything more than sell down its holding at a good time, but insiders at VRI point to this time as the beginning of poisonous relations between the parties.

This matter has had a good public airing, as has another board battle waged by Mr Barton at Amity Oil during which his share trading habits came in for scrutiny from his opponents.

It might be worth noting that Mr Barton’s opponents in the Amity battle used the services of corporate spoiler John McGlue, who is currently on the case for Mr Ivory.

Mr Barton originally made his name as a heavy hitting institutional dealer at Hartley Poynton – back in the days when corporate battles at minor public companies were apparently less personal and less public.

Anyway, back to the issue at hand. The other milestone events in the current stoush are the resignation of Leon Ivory from the AHG board on February 27 and a recent move by AHG to spill the VRI board, with the aim of removing Mr Ivory but retaining his long-standing business partner, Mr Slatyer.

AHG sources say the company’s confidence in Mr Ivory had eroded over time.

It is worth recalling that this is not the first major falling out that Mr Ivory has had in recent years.

Five years ago Mr Ivory quit the board of Cortecs Plc, the UK-listed result of his transformation of WA-based cash box Western Capital into a market darling of the biotech sector.

He left that board in July 1998, about a month after the dramatic departure in June 1998 of his long-time associate Glen Travers, the Cortecs CEO whose extravagant remuneration package and company-funded lifestyle became folklore at the time.

Before following Mr Travers from the Cortecs board, Mr Ivory – who had chaired the company’s remuneration committee – publicly defended the $2 million-a-year package.

During the six months following his departure from UK-listed Cortecs, the company reeled from further widely reported bad news including:

• job cuts resulting from an £18 million loss;
• an admission from its chairman Chris Patten that Cortecs had a reputation for failing to live up to promises;
• revelations that Mr Travers’ share benefits in 1997-98 totalled $33.3 million, due to conversion of options into equity when Cortecs’ main listing was moved from Australia to the UK in late 1997; and
• shock disclosures that investors had effectively been misled about progress on its two lead drugs.

Despite attempts, I have not been able to contact Mr Ivory to discuss both his role at Cortecs (which exists today as a successful company under the name Provalis) or the current issues at VRI. I have been told that he has suffered from the flu following a recent trip to Hong Kong and, probably wisely under the circumstances, taken to a hospital bed just in case.

What I have noticed are efforts by Mr Ivory’s camp to reassure VRI’s investors about corporate governance issues – like the fact that recent restructuring of Mr Ivory’s role to executive chairman left the Perth-based chief financial officer John Frame reporting to him, not the new Sydney-based CEO.

This is a recent transitional arrangement, I am told, and will only last until new CEO Peter French becomes a fully-fledged board member.

It seems likely that, with mud flying around, the issue of corporate governance is where both sides believe the other is weak.

And that may lead us to the final element of the falling out among partners, the role of Mr Slatyer.

Sources within VRI point very much to Mr Slatyer’s perceived defection to the ranks of AHG as a major issue.

With strong knowledge of VRI’s plans from his position on the company’s board, his move to run on a ticket (since withdrawn) apparently against his long-time mate Mr Ivory, may well be the key to this nasty falling out between investment friends.