Australian super funds are beginning to warm to the overtures of activist investors, and for larger ASX-listed companies it is likely to be a question ‘when’, not ‘if’, according to a new report.
A new report titled Shareholder activism in Australia makes the case that shareholder activism is already alive and well and “primed for more activity”.
The report, prepared by consultant Activist Insight and commissioned by commercial law firm Arnold Bloch Leibler, pointed to the legal and structural reasons that make Australia “ripe for activism”.
First, Australia’s ‘two strikes’ rule allows just 25 per cent of shareholders to vote down a company’s remunerations report and spill the board of directors.
In addition, there is a relatively low threshold (5 per cent) required to call an extraordinary general meeting.
The report also highlighted the relatively high degree of institutional shareholdings in Australian companies due to the large superannuation fund pool.
“In Australia, the real power lies with superannuation funds, which have lately begun to show signs of warming to activists,” said the report.
Activist investor Mark Carnegie, who was interviewed for the report, was recruited by Perpetual to persuade construction industry firm Brickworks to unwind its cross-shareholding in Washington H. Soul Pattinson.
As many as six superannuation funds supported Mr Carnegie’s election of independent director Elizabeth Crouch to the Brickworks board.
“Large numbers of super funds have also voted for dissident candidates in foreign contests at Darden Restaurants, DuPont, Carrefour and Telecom Italia,” said the report.
Thorney Opportunities chairman and activist investor Alex Waislitz said his company had been approached by “one of the largest [Australian] institutions, which had had its engagement efforts rejected”.
“That is an indication that change is on our doorstep,” Mr Waislitz said.
In order for Australian activist investors to thrive, they will have to convince the wider shareholding community that they can turn larger companies around, said the report.
“Investors will have to conclude that executive teams do not always deserve a second chance, and that sophisticated activist campaigns can create value for all shareholders,” said the report.
“In short, Australia needs its [US activist investor] Bill Ackman. For larger Australian companies, the question is likely to be ‘when’, not ‘if’.”