25/02/2008 - 15:57

Stokes takes aim at WAN board, performance

25/02/2008 - 15:57

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Ever since Kerry Stokes' Seven Network Ltd made a pre-emptive strike on the WA Newspapers Holdings Ltd share register in late 2006, everyone in Perth has been wondering when he would throw his weight around. Today he did just that.

Ever since Kerry Stokes' Seven Network Ltd made a pre-emptive strike on the WA Newspapers Holdings Ltd share register in late 2006, everyone in Perth has been wondering when he would throw his weight around.

After 18 months of remaining behind-the-scenes, Seven started throwing punches today aiming squarely at the board in the first instance, pointing to the poor performance of the media group across a range of areas.

Seven has demanded two seats on the WAN board and requested a meeting to sack all four non-executive directors - chairman Peter Mansell, Jenny Seabrook, Mel Ward and Erich Fraunschiel - as part of that process.

The television network has nominated Mr Stokes and Peter Gammell for two of those positions and is effectively inviting interested parties to nominate for the other positions, with the enticing prospect of nearly 20 per cent of the votes available for a worthy winner.

While today's announcement was damning, Seven is still in a pretty delicate position because, even with its big stake, it will have to rely heavily on WAN's broad shareholder base for support.

Many of those shareholders have a love-hate relationship with the company, and it's a big test of their loyalties to ask them to vote to give one major shareholder, a media competitor, a spectacularly strong voice.

Ask most people in corporate Perth and they hate The West for one reason or another.

But that kind of sentiment was not dominant at the annual general meeting late last year. While investor activist and failed West board hopeful Stephen Mayne berated the editorial policy of The West under editor Paul Armstrong and accused the paper of being soft on former premier Brian Burke, many rank and file retail shareholders voiced their support for the perceived hardline the paper had taken in questioning the state government.

That independence was clearly valued by many shareholders.

Whether or not they believe a board dominated by Mr Stokes is able to continue that is yet to be seen, though it is known that the Seven camp is prepared to play the parochial card with its strong links here via its chairman, Mr Stokes, who bases his private interests here.

Of course, not everyone at last year's AGM was happy.

The newsagents who have long been the workhorses of the newspaper's critical distribution operations voiced their discontent loudly.

Many claim they've been marginalised over the years as the company has sought to lower costs. What tipped them over the edge has been problems causing delays and delivery woes on a regular basis. Many a home delivery subscriber will know this, though WAN says this has nothing to do with the new printing presses.

Mr Stokes believes differently. In his announcement today he points to the issue of the implementation of $210 million printing presses, tugging at the economic heartstrings of what are a numerous and potentially vocal set of stakeholders.

The Seven announcement also stroked the economic interests of that other rump of shareholders, the so-called mums and dads, especially those who like their dividends and don't like to see them fall.

By aiming at the existing board and suggesting they are some sort of club that has failed to put WAN on the right pathway, Mr Stokes is trying to neatly divide the leadership from its shareholder base as its first strike.

It has not sought the head of relatively new managing director Ken Steinke, the only director with serious media experience, again suggesting that the Seven camp are aiming to keep this as a fight against the WAN board in the first instance.

Just how this plays out in terms of communications will be interesting.

The WAN board members will be severely restricted in how they can react to the demands of a large shareholder.

On the flip side, Seven again will have to be delicate about how it uses its own massive resources lest it be seen to be simply one media company trying to get cheap control of another.

One of those targeted by Seven, WAN chairman Peter Mansell told WA Business News that despite the frontal attack on him and other directors the board would be acting dispassionately in the best interests of shareholders.

Mr Mansell , who is also chairman of Zinifex Ltd which attempting to takeover Allegiance Mining NL, maintained that the board was concerned about the potential for conflict of interest with regard to having a media competitor sitting in the inner santum at Herdsman.

Furthermore, he said that the board was also concerned with Seven gaining control without paying a takeover premium.

 

Below is the full Seven announcement:

Seven Network Limited is today requesting West Australian Newspapers Holdings Limited (WAN) to call an Extraordinary General Meeting of shareholders at which it will put resolutions for the removal of all Non-Executive directors.

Chairman of Seven Network Limited, Mr Kerry Stokes said "We have been appalled at the lack of leadership of the Board and the resulting performance of the company. Financially the reduction in the current dividend is symptomatic of the Board's performance. It is the only major media company in Australia forced to reduce its dividend payment, even against a strong local economy".

Over a year ago, the WAN Board advised production would be improved with the purchase of the new printing presses ($210 million). This has simply not been achieved, as they have admitted in their half yearly results. There are fundamental issues with delivery which cause their partner newsagents extreme difficulty by the failure to get the paper out.

The longstanding substantial Saturday circulation margin over the Sunday competition has been eroded to the point where the West Australian could slip behind its Sunday competition with obvious serious implications for advertising.

Mr Stokes said: "As the largest shareholder in WAN, we have watched these developments with concern. We have tried to put the arguments to the Board but they have failed to manage the business. They have had ample time to correct these ongoing issues.

"The continuing poor performance became evident to us over six months ago and prior to the AGM we sought 2 board positions. The Board engaged with us before the AGM but we were then rebuffed. Their stated concerns included that there would be competitive conflict and this was promoted in the editorial of the Newspaper. Such arguments are without foundation. Seven is not in the newspaper business and we do not compete with WAN's business. We believe however our experience in media and newspapers will be valuable in taking this company forward in the future. The Board appears to have no understanding of the requirements of a media business," Mr Stokes said

As a result, Kerry Stokes and Seven Network Limited Board Director, Peter Gammell, will stand for election to the WAN Board. Seven accepts the WAN Board's position that five is the appropriate number of Board directors and we are nominating to fill 2 positions. Seven urges other WAN shareholders to nominate appropriate candidates to fill the other board positions.

Seven does not seek board control of WAN by this move and believes that WAN should continue to be an independent newspaper that serves the interests of all of its shareholders and the Western Australian community.

 

 

 

 

 

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