Return To Main MenuThe Packers now face a routine investigation by the New South Wales Casino Control Authority into their personal and business affairs. Before it can approve the takeover, the authority must be convinced that the Packers and all of their close associates are of good repute with regard with character, honesty and integrity. In the process, their business dealings will be closely examined. There is one deal that may attract the Authority’s interest. It has nothing to do with the casino but once again it illustrate the reluctance of (?) to take on the power of the Packers.
The deal involves one of Australia’s oldest public companies, ANI.
Footage from corporate video: Australian National Industries was forged in 1911 and began operations as an automotive engineering business in Sydney. 83 years later, ANI has become Australia’s largest publicly listed engineering company.
In 1989, a controlling stake in ANI was bought by Kerry Packer’s family company Consolidated Press Holdings or CPH. Packer sold it again two years later at a profit of 180 million dollars. ANI wasn’t so lucky, it since lost close to 400 million dollars on the deal. The reason is that before Packer sold his stake, he off-loaded onto ANI a company he no longer wanted, an environmental engineering firm based in Europe called ABT.
The deal into question came to light when Ross Palmer joined the board of ANI after it took over his family firm, Palmer Tube Mills. Palmer and his wife Sue became the biggest shareholders of ANI. It was Palmer who revealed the extent of ANI losses and started investigating the transactions with Consolidated Press.
Ross Palmer would not be interviewed by Four Corners but Sue Palmer agreed.
Sue Palmer: "There were a lot of "do not disturb" signs put up. I am on this programme and people have said "you would go on Four Corners and talk about Kerry Packer?" with amazement. Inteligent people, Australians… I find that this kind of power, whether it is real or perceived, which causes fear is very dangerous."
Internal company documents from ANI and Consolidated Press Holdings obtained by Four Corners shed new light on the history of the deal.
In 1991, Kerry Packer set out to slash costs at Consolidated Press. An edict went out demanding an action plan on all problem investments and assets for Kerry. [Memo From Don Bourke to Paul Reading. Date: 16/7/91. "An action schedule on all CPH’s problem investments/assets for Kerry (Packer)]
The European waste treatment firm ABT was one such problem asset. Packer wanted to arrange for ANI to take over the management of the ailing company. [Memo From Don Bourke to Evan Rees. Date: 14/1/91. "Mr Packer…wanted…ANI to formally take over the management of the European environmental business…"] It was the first step to Consolidated Press off-loading ABT.
Sue Palmer: "ANI was used, I believe, just as a dumping ground for this company. Two weeks after the deal was completed, Kerry Packer sold all of his interests, 48%, in ANI. If ABT was a good company, why were they so keen to unload it? And leaving the other 52% shareholders with a company that was going to bring it down, a division that was going to bring ANI down."
Legal advice to the ANI board concludes that ANI appears to have a case for damages against Consolidated Press and some of ANI’s then Directors. The advice cites evidence of possible breaches of the requirements to act with honesty, care and diligence under the corporations laws and possible breaches of the Trade Practices Act over misleading and deceptive conduct. [Mallesons Stephen Jaques. Advice to ANI board 12 September, 1996. "There appears to be a basis for claims to be made against CPH." - "(CPH) may well have contravened s232 of the Corporations Law"]
Ted Rofe (Australian Shareholders’ Association): "As a shareholder in ANI, I’d be concerned at the investment which had cost several hundreds of millions of dollars"
The Australian Shareholders’ Association, like the Palmers, says ANI investors have reasons to be concerned.
Ted Rofe: "Shareholders are entitled to expect their directors act diligently in the interest of the shareholders, and I think this case in particular illustrates the importance of the role of independent directors of listed public companies."
ANI’s own assessment shows that the prognosis for ABT was poor. Contracts signed by ABT in Europe were very adverse. There was the opportunity for a financial disaster. The situation had been allowed to run totally out of control. While ABT was only worth two million dollars, it carried liabilities worth tens of millions. The view of finance director Paul Reading was that taking on such a burden would be "clearly incorrect". ANI as a public company could not take over liabilities entered into by one shareholder: Consolidated press. And yet, in September 1991, the purchase of ABT was approved at a meeting of the ANI board. Despite all the information that was available, the minutes show the directors present voted unanimously for the deal. What’s more, they agreed to take over from Consolidated Press all liabilities including for any further losses. [Paul Reading September 27, 1991. "A number of very large guarantees will need to be issued"] Details of this indemnity which has since crippled ANI were not revealed to shareholders in either Australia or the United States.
Bruce Babcock (institutional Shareholders’ Services): "Their failure to disclose to shareholders, to tell them that they had taken on this enormous risk, or open-ended risk was unacceptable. That type of information should be disclosed to the shareholders so that they can assess the true value of the company they are owning."
The independence of the majority of ANI’s directors is a major issue. Of the seven directors at the meeting, three had been appointed by Consolidated Press. The record shows that another two, Paul Reading and Evan Rees, were being paid bonuses agreed to by Kerry Packer of two million dollars each. The bonuses were meant to be rewards for helping to rationalise ANI. But it clearly wasn’t ANI that benefited from this deal. It was Packer and Consolidated Press.
Sue Palmer: "It’s is quite extraordinary. Two million dollars was promised to two directors, before and after this ABT acquisition. They received one million dollars each, promised the other million at a later date. My personal opinion, it sounds to me like that kind of money could buy a cooperation. It’s too powerful."
ANI shareholders were kept in the dark about key aspects of the ABT deal. In the 1992 annual report, the purchase of ABT doesn’t even rate a mention. And there is no explanation for the huge bonuses paid to two directors. The full details of the indemnities adopted by ANI were not revealed in the accounts until five years later, when the auditors started asking questions.
There was much at stake for ANI’s shareholders in this transaction. And yet, the directors never sought shareholder approval for the deal. Under the rules of the Stock Exchange, directors must obtain shareholders approval for any transaction worth more than 5% of the company’s value. When ANI’s finance director Paul Reading did the calculations, the value of the deal, including the indemnities, came to 33 million dollars. Enough to require shareholder approval. The record shows that a second calculation was then done which re-valued the deal at 18.3 million which was under the threshold for shareholder approval. The legal advice to the current board is that there must be genuine concern over the validity of the lower calculation that was used.
The directors handling of the ABT deal has caused ANI’s American investors to back the Palmers in their call for a full investigation.
Bruce Babcock: "The fact that it was a related party transaction does indicate that the shareholders should have been told. It is even more important for shareholders to get all the information because Consolidated Press had just recently become a major shareholder in ANI. They carried out this transaction in ANI and then sold their position in ANI. This is somewhat questionable, not for Consolidated Press because they made a profit from this transaction. It may have been a normal business decision but we don’t know because the details were not disclosed to shareholders."
Two separate legal opinions the ANI board obtained by Four Corners concluded that there appears a basis for claims against Consolidated Press and against four of ANI’s then directors.
Footage from an ANI corporate video: ANI offers shareholders strong returns from investments in one of Australia’s most responsible company.
But once against, shareholders have been kept in the dark. The legal advice revealed by Four Corners has not been disclosed. The current ANI board is waiting on yet another legal opinion.
Ross Palmer was recently thrown off the board for his campaign for a full investigation.
Sue Palmer: "I think Ross was in for the shock of his life when he discovered they had turned their head away from it. My question is why did they turn their head away from it?"
Reporter: "And why do you think they did?"
Sue Palmer: "Because of the very perception of people wondering why I am on this show. It was fear. You don’t question what Kerry Packer does."
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