Vocus plot was sure to flop after an untimely share sell-off

James Spenceley’s move to sell 76 per cent of his Vocus stock in August effectively killed his chances of a board coup.

Vocus founder James Spenceley. Illustration: Sturt Krygsman.

James Spenceley’s decision to sell 76 per cent of his Vocus stock in August effectively killed his chances of pulling off this week’s attempted board coup to dump Geoff Horth as chief executive.

The sale of 3.2 million shares a matter of weeks after the company had just done the rounds raising $650 million for the $807m Nextgen deal was not a good look.

It angered shareholders, so when Spenceley knocked on chair David Spence’s door two weeks ago to outline his planned coup he wasn’t exactly a welcome sight. Still, Spence gave him two weeks to present his proposal to the board and his plans for how he would take the company forward.

On Tuesday the board accepted Spenceley and Tony Grist’s ultimatum, judging their plan didn’t rate — and in any case, how could he take the company forward after what he had done to its shareholders after dumping his stock and setting up rival operations?

As difficult as it might seem to dump a successful operator, the reality was Spence was left with a simple decision from the day Spenceley chose to sell his shares.

He sold at $8.30 a share and they have continued to fall ever since, closing down 2.8 per cent at $5.47.

Both Spenceley and Horth had built their empires by acquisition, with Vocus making 20 deals in the past five years, and M2 about eight acquisitions, but this one was different because it was being treated as a merger of equals.

Trouble was Spenceley doesn’t have any equals. Horth had made his name as an integration specialist and he has achieved that by making the new people feel like part of the team from day one and getting on with business.

The M2-Vocus combination was carefully thought through with exactly equal numbers, with Horth as chief executive, Vocus’s Spence as chair, and the “brains” of both companies Spenceley and Vaughan Bowen as executive directors. Below the senior leadership team the M2 team had slightly more people but it was a more people-intensive business.

Maybe the balance was too perfect and something had to give, which happened this week.

Spence, of course, is also a legendary entrepreneur in the industry, having worked with Malcolm Turnbull’s old company OzEmail before establishing unwired and creating his own telco legend. Bowen picked up Horth in 2009 from People Telecom and not long after he joined M2 in 2009 it acquired his old company Commander Communications.

Ever since last year’s $3.5 billion merger, Horth has tried to instil the same teamwork that he has managed to build in his expanding empire. This week’s board split may well be the catalyst to create that team now the leadership tension is settled. That is the big white hope from yesterday’s carefully crafted company statement unveiling the board departures and confirming Horth’s position.

Certainly he has strengthened his hold on the company.

Vocus is the fourth-ranked telco behind behemoth Telstra, Optus and TPG and consumers need it to flourish free from in-house spats.

Magellan adjusts course

Magellan Financial Group has finally seen the light and withdrawn an extraordinary motion from today’s annual general meeting, which could have given chief Hamish Douglass’s family up to $10m on his death or illness.

This form of self-insurance from shareholders must be close to a first in corporate Australia and must also make you wonder what is happening in the minds of the fund manager.

Now it should be noted Magellan is not the only company to pay out life insurance in other forms — ANZ used to have $170,000 a year in life cover for former boss Mike Smith, who of course picked up $8.5 million from eight years work in the bank.

Wesfarmers notes of the 124,000 in combined performance shares being awarded to chief Richard Goyder and CFO Terry Bowen that the board has discretion to award the shares in the event of death or illness.

None of which excuses Magellan and all its talk about value investing seems to have gone when it applies to Douglass’s own pay packet, as shown by this year’s move to increase his pay to 1.5 per cent of operating profits.

The last guy to pull that stunt was Wal King during his Leighton reign. This means in the 2017 year Douglass’s fixed pay will increase from $1.2m to $2.7m and under the now withdrawn proposed self-insurance policy his family would have received an insurance payout of $5.5m, being 200 per cent of fixed pay, in the event of his illness or death.

Douglass owns 11.1 million ordinary shares in the company and his 10.2 million class two shares will shortly convert giving him a combined holding worth $470m and paying $18.9m in dividends.

Suffice it to say the proxy groups hit the roof on reading this news and shareholder complaints have now led Douglass to withdraw the motion, even though early proxies indicated 70 per cent shareholder support. This shows that while making a mistake initially, Douglass has at least now fixed it.

Not content with lining his own pocket, Douglass has also decided that shareholder funds should be spent on his own Magellan public policy think tank.

In his annual report note, Douglass confided he was hiring three people to form a public ­policy institute which would be based in Australia and no doubt work closely with the great man.

ASIC whack for shonks

Financial Services Minister Kelly O’Dwyer yesterday backed Australian Securities and Investments Commission calls to scrap the exemption to insurance claims handling in the corporations law which will mean the regulator has more direct power to whack dodgy insurance companies.

It acts now through financial services licensing power. The industry will now also be under greater scrutiny with the Australian Prudential Regulation Authority to publish claims handling statistics for each of the companies under their own names, which will tend to put the spotlight on those who reject too many claims for the wrong reason.

APRA also has the power to direct insurers to clean up their back offices if they are deemed to be too slow or outdated with the obvious threat that if they fail to do so, they could lose their licences to operate. ASIC’s data collection unveiled yesterday showed extraordinary variations in claims handling with some insurers rejecting double the industry average. The case is now made, the industry is on notice and now the regulators have to take action for any misdemeanours to ensure standards are improved from their present shoddy levels.

New chapter in banking

Catherine Livingstone is a self-confessed master of detail with a no-nonsense reputation which is exactly what CBA needs as it tries to convert its stock market reputation into mass market appeal.

Her relationship with chief Ian Narev will clearly be pivotal in this quest. Narev and former Telstra boss David Thodey are good friends so he will be able to pick up tips on working with his new boss.

Outgoing CBA chair David Turner will now return to the UK having delivered on his promise of diversity by installing the first female big bank chair in Australia.