After losing the main election Bermuda-based Brookfield is attempting a Trumpian alternative which would need a new round of ACCC, ASIC and ASX approvals, given the different nature of the proposal.
In short, the Bermudans, having lost the main vote, must now walk through a legal minefield to revive their deal immediately, starting with the interpretation of section 621 (b) which outlaws lower priced bids, related party transactions and then to new issues.
The only way the Bermudans get to control the retail energy assets is via an extraordinary shareholders’ meeting ahead of winning formal control, which would then allow them to vote their shares on the asset split.
Given the offer on the table is lower than the original price, and the artificial structure being proposed, it is inconceivable the board would back the deal.
In the unlikely event it did, the ACCC would legally be required to revisit the deal as the structure is different, and as the Bermudans own Ausnet and want to control energy markets, authorisation is needed, because the ACCC has already said the deal substantially lessens competition.
First time around the Bermudans simply promised to tell the ACCC when they invested in renewables – they didn’t promise to invest. Can the ACCC be duped twice?
The bottom line is yes, tens of millions of cashed-out executive options and investment banking fees are in danger of disappearing, but the Origin board has to say no.
Touchy watchdog
NSW senator Andrew Bragg sometimes works from the idea that the best person to hit is someone who won’t punch back, and ASIC boss Joe Longo is perceived as a convenient target.
Regulators are easy because by definition there is always someone who will disagree with their decision.
They also make mistakes but are held to account as if they should be perfect. If something goes wrong then they are the first to be blamed because “they should have stopped it”. This week’s annual ASIC conference in Melbourne was attended by 650 people who were broadly supportive, which should have given Longo a degree of confidence that he is indeed doing his job well.
He still bemoans the absence of obvious friends, suggesting he too doesn’t get it.
As he himself noted, his three tasks – to provide clear rules, maintain market integrity and encourage financial innovation – are not always easy, even when achieving the first two will deliver the third.
There is sometimes a defensiveness to Longo’s public appearances, due in part to some well-publicised internal brawls and the constant harping from the aforementioned Bragg.
The best advice for Longo is to treat Bragg’s criticism as the irrelevance it mostly is.
Yet Longo is quick to respond to the public attacks, as is his heir apparent, his deputy and enforcement boss, Sarah Court.
Ken Hayne’s royal commission concluded four years ago and Longo’s team has learnt from past mistakes, and also worked through the backlog of cases, which means the prosecution case count has eased.
In unveiling her enforcement priorities at the conference, Court noted: “It is no exaggeration to say that we are before courts across the country pretty much every business day.”
She selectively quoted numbers to include the post-Hayne deluge, boasting that “over the three years to 30 June, we commenced more than 100 civil actions in relation to 220 defendants, more than 100 criminal actions were prosecuted by the CDPP following an ASIC investigation, and as a result of those actions, nearly 100 convictions were imposed, of which 44 attracted a custodial sentence.”
This is in addition to the more than 600 prosecutions undertaken by ASIC for strict liability offences, she adds, noting more than $600m in criminal and civil penalties have been imposed by the courts across that period.
The 2024 priorities include targeting design and distribution obligations to ensure products get to the right people. DDOs came into effect in late 2021 and so far 80 stop orders have been issued preventing dodgy products getting released.
Licensee reporting will be watched to ensure breaches are notified. Small business credit providers are on notice, as are auditors and liquidators. Technology will also be a focus, with market operators responsible for ensuring operational resilience.
Superannuation providers will be held to account for bad member service and misconduct. Laying down enforcement priorities is good regulatory practice, putting the market on notice and putting the regulator on the record so benchmarks can be checked.
With financial reporting now incorporating more sustainable metrics, corporate Australia is also on notice to ensure they don’t exaggerate their efforts.
ASIC is proud of its efforts on greenwashing so you can expect more on this front as more regulations come into effect.
Taming AI
Microsoft invested $US13bn in OpenAI in the hope of using its technology to bridge the gap with competitors like Google in search, among other potential uses.
The money bought the company just under 50 per cent of the ChatGPT creator, which has an unusual governance structure controlled by the board of a not-for-profit which has no control over decisions.
That view changed when the majority of the board sacked chief Sam Altman, worried he was not cautious enough about the potential social problems that AI may cause – like stealing content. In less than a week Microsoft flexed its muscles and reinstated Altman, sacked the renegade directors and promised to stack the board with like-minded individuals.
AI as noted here previously is a genuinely groundbreaking technology which promises extraordinary benefits but has some potential dangers, like running roughshod over intellectual property rights at the risk of destroying creative content in newspapers, films, music and literature.
Microsoft is now a national hero in Australia, with Prime Minister Albanese last month publicly endorsing the $US2.4 trillion company’s $US5bn investment here.
How, after this endorsement, could the government do something which may upset the company by ensuring its partners at ChatGPT don’t denude the country of creative content by escaping copyright controls and commercial compensation?
The US tech giant has no governance concerns over how Open AI is run, so how does the Australian consumer fare?
The long-promised legislative change to Australian competition rules to give the ACCC so-called ex ante (before-the-event) powers now has a new target, with Microsoft joining Google, Meta, Amazon and Apple.
Just how the amendments will work is the real question because Microsoft has shown it knows how to flex its muscles.
Merger review
Then again, Treasurer Jim Chalmers has proved a much better talker than decision-maker, as shown by the plans to review merger rules.
On August 23 he said in a statement: “The Albanese government is undertaking a review of competition policy settings to help build a more dynamic and productive economy.”
The Albanese government is reviewing merger rules and processes to ensure they support competitive markets, economic dynamism, and better outcomes for the Australian people.
As part of its review of the nation’s competition policy settings, the government is releasing a consultation paper on potential merger reform.
Index finger points to day of reckoning for ALP
Living standards for those voters who will be most critical to the outcome of the election, otherwise known as middle Australia, may not yet be dancing to Jim Chalmers’ tune of optimism.
Albanese’s bomb denial may blow up in Labor’s face
The Prime Minister’s defence is illogical, his argument unsustainable and his political attack on the opposition completely at odds with his call not to politicise national security.