Chatfield nears exit aisle

NEIL Chatfield will stand for re-election as Virgin chair but he will also likely say he will step down before his term expires.

NEIL Chatfield will stand for re-election as Virgin chairman at the company’s annual meeting but he is also likely to say he will step down before his term expires. After seven years as chairman and nine on the board, Chatfield’s time is probably up — especially given a workload that includes the chair at Seek and board seats at Recall and Transurban.

The extra term will allow Chatfield time to choose his successor while providing some stability under the new structure. The move also comes after just three meetings of the expanded board, which includes representatives from Air New Zealand, Etihad and Singapore and amid continued speculation that the company would be better off as a private company.

Company sources reject market talk of tension on the board, ­although externally the talk suggests Air New Zealand’s Chris Luxon is a vocal participant in discussions.

The first task for Chatfield would be to find a replacement chair to handle the delicate management of the board and, outside of a new external candidate, the most obvious internal choices would be former trade minister Mark Vaile or Sam Mostyn.

The Virgin moves come as rival Qantas enjoys a revival of sorts, with the stock price closing up 5.26 per cent at $1.50 yesterday after jumping more than 7 per cent last week on annual meeting talk of returning to profits.

Analysts are not tipping Virgin to be back in the black until the 2016 financial year.

The new board works under strict protocols that mean the rival airlines don’t discuss anything to do with international issues or Tiger, which until recently was majority-owned by Singapore.

This means the board meetings are structured to get most matters out of the way before the “real” talk comes in the afternoon.

The Tiger acquisition will allow Virgin CEO John Borghetti to cut costs and run the budget carrier more cheaply, by among others means moving management and facilities in Melbourne using unused hangar space.

Siddle cashes in

A NOTE to the ASX on October 13 revealed Ramsay Health chairman Michael Siddle was the beneficiary of a substantial benefit from his late friend, Paul Ramsay

Siddle was granted options over 3.75 million shares for the price of $1. The shares on yesterday’s close were worth $196.8 million, but it is not clear whether it was just $1 for the total option or $1 per share, in which case Siddle would have to pay $3.75m.

With shares closing at $52.49 yesterday, either way the Ramsay chair is in front.

Future looks bright

OSCAR Wilde famously said if you don’t like flattery you have never been flattered, so Future Fund chief David Neal would be impressed that banker John Wylie was in Business Spectator yesterday pushing the concept of letting retail punters benefit from Future Fund management by proposing that retail funds could be managed in a separate fund by the Future Fund, with the same asset allocation and manager selection as the principal fund.

The fund has done an extraordinary job, thanks in no small part to Neal’s efforts as chief investment officer and now boss.

It is a long-term investor and would be uninterested in doing the paper work on a trickle of email funds. But what would stop an outside aggregator from collecting the funds for the Future Fund, which would operate a No 1 and No 2 fund with the same investment style.

One if the benefits of the fund is that it knows no money can be withdrawn until 2020, which makes long-term management a lot easier, but from that date money can be withdrawn.

Likewise with deficits tipped for the foreseeable future the chances of more money coming in are not great, with the exception of the government’s proposed medical research fund if that is approved.

By contrast Australian Super, which now has $80 billion under management, is working on the assumption that by then it will have another $60bn or $140bn.

Any money going into the super fund would have to be long-term and under strict withdrawal rules, but in concept it makes sense and would provide more competition to the market while creating a genuine behemoth. The governing legislation would also have to be changed.

Doing ANZ numbers

THE ANZ template snafu suggests that, when Mike Smith reports his numbers on Friday, he will beat consensus by about 3 per cent and come out with a profit of about $7.13bn.

Mixing the drugs

GLAXO Smith Kline and Novartis are in the midst of doing what drug companies do best — consolidating. The Australian ­Competition & Consumer Com­mission is following its inter­national peers in considering the GSK purchase of the Novartis human vaccine assets and the Novartis purchase of GSK’s oncology drugs. While doing multi-billion-dollar mergers, the Novartis team added a third leg by selling its animal health arm to Eli Lilly.

In the middle of this, the CSL $US275m global influenza acquisition from Novartis seems decidedly small-scale albeit important in helping offset antitrust issues.

The loss-making business puts CSL’s Parkville centre in Melbourne together with two offshore labs to create a genuine global force that may do for CSL what international plasma did all these years ago for Brian McNamee. The business lost $US138m last year on sales of $US527m due in part according to CSL to the heavy investment in state of the art facilities. This is an opportunistic deal in classic CSL style and comes as the global market is moving on to the next leg in vaccines, which can handle three and four-virus strains at the same time.

Synergies of $US75m are expected faster than the $100m in ­integration costs. From there CEO Paul Perreault has taken a potentially stranded local asset global and that is no bad thing.

Not such a dream

CBA has borrowed a trick from the Deutsche playbook in delivering a cash-settled equity swap to Vocus boss James Spenceley to allow him to deliver the news last Friday that he was the proud owner of 10 per cent of Amcom.

Earlier in the week Spenceley had raised eyebrows by picking up just 5 per cent of the stock at 3 per cent above market through Morgan Stanley. Credit Suisse is his adviser on the deal so he has shared the spoils around as far as banking friends go.

Amcom’s Chris Stein has Lazard helping him decide firstly whether to let Vocus do due diligence and if so at what price.

That point is yet to be decided and, while we known Spenceley paid $1.94 a share last week, the market is already at $2.09, which suggests the asking price needs to be at around this level before he gets in the front door.

It should also be realised that while the merger of the east and west coast data manager stocks might be seen as a dream marriage, it was not what Stein was planning to do when he raised money himself earlier last year and talked up growth on his own.

If it’s a takeover then one of the dream marriage partners will lose much of its management and the dream takes on a new complexion.

Still the industrial logic is clear, Amcom’s has the west coast commercial fibre market and Vocus the east coast and a bigger company needs to be formed to take on Telstra and Optus.