Tensions between struggling department store Myer and its major shareholders have escalated further after influential investor Geoff Wilson joined billionaire retailer Solomon Lew in calling for sweeping changes to the board.
The Wilson Asset Management chairman on Tuesday issued a directive to Myer's chairman Garry Hounsell, calling on the retailer to permanently reduce its number of directors and slash their fees.
Wilson Asset Management's Geoff Wilson has issued the company with a 'please explain'.Credit: James Alcock
In the letter, seen by The Age and The Sydney Morning Herald, Mr Wilson said he believed it would be appropriate for Myer's board to reduce its size and fee pool to be in line with companies of similar market capitalisation.
"I note that in the 2020 annual report that the non-executive directors have accepted a 16.7 per cent fee reduction in response to the impacgt of COVID-19," Mr Wilson said.
"Our belief is the reduction needs to be permanent. We would also call on the board to reduce the directors' aggregate fee pool to reflect the current market capitalisation of Myer."
Myer, which has a market capitalisation of just $193 million, has seven directors on its board including chief executive John King. Non-executive directors received a total of $791,870 in remuneration for the 2020 financial year and $1 million in the year prior.
Shares fell 3.4 per cent to 23 cents following the news.
Mr Wilson's calls were backed by fellow Myer shareholder Glenn Hargraves, a stock trader and entrepreneur who owns about 1 per cent of Myer's shares. Mr Hargraves said he had previously supported pushes to depose the Myer board and would do so again.
"I think it's time for a change, so anything [Mr Wilson] can do to put the pressure on," Mr Hargreaves said. "Reducing the board down, or even changing the board, that's a good idea."
"Anything to bring the costs down."
The move to change Myer's board follow calls from dissident shareholder Mr Lew in early September after Myer revealed a $172 million underlying loss for the year. The Premier Investments chief, who owns 11 per cent of Myer, labelled the result "disastrous and shameful" and called for the board and Mr King's resignation.
At the time, Mr Wilson did not indicate if he supported Mr Lew's calls. His correspondence today marks new territory for the veteran stockpicker, who has historically supported the Myer board through Mr Lew's previous attempts to overthrow the company's management.
While Mr Wilson's demands are less extreme than Mr Lew's, both are now publicly agitating for change at the beleaguered retailer. Between the two and Mr Hargreaves, the three hold about 20 per cent of Myer's shares, a significant bloc if anything was put to a vote.
Mr Wilson also issued Myer with a "please explain" regarding the department store's commercial agreements with its suppliers, referring to Mr Lew's statement that both his company Premier Investments and other suppliers were currently "hesitant to do business" with the company.
Myer chairman Garry Hounsell.Credit: Justin McManus
"Please clarify whether any suppliers, including those associated with Solomon Lew, have withdrawn from their commercial agreements with Myer," Mr Wilson said.
He also queried if Myer suppliers could still obtain credit insurance policy, referring to The Age and The Sydney Morning Herald's coverage that major insurance providers had ceased issuing new cover for suppliers of Myer and David Jones due to insolvency concerns.
The shareholder also drew attention to Myer's stash of franking credits which would allow the company to pay a $118 million fully-franked dividend if it had the required profits.
"Can the board confirm that, when prudent, it will distribute those franking credits to their rightful owners, Myer shareholders?" Mr Wilson said.
Wilson Asset Management has asked Myer to make its response to the letter public. Myer did not comment.
At Myer's full-year result, released earlier this month, the company revealed it had plunged to its second-largest loss in history after a year battered by the COVID-19 pandemic. The company is in the midst of a turnaround plan to reduce its store space and boost its online sales.
Business Briefing
Start the day with major stories, exclusive coverage and expert opinion from our leading business journalists delivered to your inbox. Sign up for the Herald's here and The Age's here.