Clash of views in Australia over ousting of NZME chairman

Friday, 12 June 2020

Australian fund says former NZME chairman and Lewis Road Creamery founder Peter Cullinane largely had 'big corporate experience'.

Australian fund manager Forager Funds says it wants faster progress and more engagement with New Zealand Herald owner NZME after helping force out the company's chairman, Peter Cullinane.

NZME announced Cullinane's resignation for its board minutes ahead of its annual meeting on Thursday where he was due to stand for re-election.

Cullinane said he decided to step down after learning he had lost the support of a group of Australian funds, known to include Forager which owns just under 8 per cent of NZME and fellow Australian fund Auscap which owns almost 18 per cent.

Forager Funds chief investment officer Steve Johnson said it didn't believe Cullinane had the skills set or experience to 'push the business fast enough'.

It had also been 'very disappointed' with the level of shareholder communications from Cullinane and NZME's board, he said.

* NZME rebels seek to break-up the media company**

'We hadn't heard from them in a long time despite reaching out to them and trying to have some conversations.'

NZME had done 'everything by the book', veteran Australian analyst Roger Colman said.

NZME had 'stuffed up' the possible acquisition of rival Stuff from its former owner Nine, he said.

Nine instead sold Stuff to Stuff chief executive Sinead Boucher for one dollar last month, and Johnson said it would not be good for NZME to have a management-owned competitor in New Zealand that would be 'fighting for its life'.

Independent Australian fund manager and former veteran analyst Roger Colman suggested ousting Cullinane was a mistake, describing him as 'one of the better credentialed media-background board members one could get'.

Colman claimed a role in encouraging Australian funds to invest in NZME when an analyst, but queried whether their involvement was now in New Zealand's best interests.

'I think New Zealand should become much more wary about fickle overseas shareholders in this industry which has such serious obligations beyond that of just earning a profit,' he said.

NZME 'tried its best' with the Stuff acquisition but was thwarted by the Government, and NZME's OneRoof property listings business was going to be a great success, Colman said.

'It will be valued at a bigger price that the radio and print operations eventually.'

NZME chief executive Michael Boggs and his team had done 'everything by the book, completely correctly using best practice examples worldwide', Colman said.

NZME's board stated on Thursday that they had confidence in Boggs and his executive team, stating Boggs had led the business through 'an incredibly challenging time, including the crisis phase of Covid-19'.

Asked if Forager had confidence in Boggs, Johnson said the fund was 'probably not close enough to make an assessment about how he has been performing'.

'But we definitely have an issue with the remuneration of senior management.'

Sinead Boucher explains her decision to buy Stuff.

Significantly more of that pay should be 'contingent on meeting shareholder outcomes', he said.

Boggs received a salary of $804,290 and an incentive payment in shares worth $204,459 last year.

Johnson said NZME should have had OneRoof 'up and running a long time ago' and its online paywall should also have been in place two or three years' ago.

'We are really optimistic about the future of the business and think the existing board and management have all of the pieces of the puzzle to make it work.

'They have got the potential to be a combination of what Fairfax have done with Domain in Australia, and what The New York Times have done in terms of having a newspaper that people are willing to pay for.'

But the message from Forager was 'faster, faster, faster', he said.

Johnson said there was virtually no liquidity in NZME's stock 'which hardly trades any more'.

'The board should be questioning 'why haven't we communicated a strategy clearly enough to investors and delivered upon it so people want to invest in our company?'

'We think they need a board that clearly articulates that strategy to the market and has the skills to move quickly to take advantage of some of these opportunities.

'We are looking for people that have experienced that sort of rapid change and taken advantage of these situations in the past and are willing to break a few things to get there – that is probably the best way of putting it.'

Cullinane – who is also the founder of Lewis Road Creamery – largely had 'big corporate experience' he said.

Johnson said NZME's board had been in touch since its annual meeting to seek Forager's thoughts.

He remained optimistic about the potential of the company which he said was 'in a position of strength, rather than weakness'.

He saw potential for NZME's share price to rise to 'three or four times' its current level and said Forager was not interested in selling its shares with that opportunity ahead.

'I don't think there is anyone here including Peter who doesn't want the best for the company.

'I would like to see this business at a point, probably inside two years, where the growing parts are growing faster than the shrinking parts are shrinking.'

Cullinane said on Thursday that NZME's share price was 'not where any of us would want it to be' and he believed the Australian shareholders were 'making a point of their view of it'.

There was not a lot of point in him being disappointed by his departure, he said.

'That is just the reality of it.

'What I am, is highly supportive of the NZME team and private sector media in this country including Stuff,' he said.