KEY POINTS:
SkyCity's board has forced out long-time chief executive Evan Davies but is denying it acted under pressure from dissatisfied investors.
But analysts say his departure has the fingerprints of large Australian institutional investors all over it.
SkyCity chairman Rod McGeoch said yesterday Davies would stand down, effective immediately,
and director and former New Zealand Post chief executive Elmar Toime would be acting chief executive until a replacement was found.
Davies' departure comes a month after the company announced a change from its previously acquisitive strategy to a more conservative approach, which included plans to trim $33 million from costs over the next 12 to 18 months, upgrade the Auckland Casino's gaming facilities, cut 230 jobs and sell underperforming non-core assets.
At the time, Davies, who was unavailable for comment yesterday, said he was not satisfied with his recent performance.
SkyCity shares closed 18c higher at $5.19 yesterday. "People are entitled to read into that what they will," said McGeoch.
Davies, who holds more than 450,000 SkyCity shares, is to receive a severance payment of $1.7 million. McGeoch said contractual arrangements dating back to 1998 provided for the payment. "There was a set number to be paid and that just all happened."
The board had decided it was time for a leadership change, "to which he [Davies] agreed".
"He affirmed the directions he had set and was confident they would bring benefits to the company. We're supporting all those changes."
While McGeoch denied the board had acted under pressure from investors, several analysts pointed out several Australian institutions on SkyCity's register had a reputation for being "reasonably vocal".
In March, Tabcorp Holdings, Australia's biggest gaming company, parted company chief executive Matthew Slatter, three weeks after reporting a profit slump that forced him to scrap plans to open casinos overseas.
Slatter reportedly left after pressure from large institutional shareholders.
Large Tabcorp shareholders Maple-Brown Abbott and Investors Mutual also own sizeable stakes in SkyCity. Investors Mutual are known in Australia as an aggressive value investor which takes large positions in underperforming companies and can put pressure on boards for change. Maple-Brown Abbott is a long-term value investor with a similar style but a lower key approach. Neither returned calls yesterday.
Paul Robertshawe, of Tower Assett Management, which owns SkyCity shares, said his firm had "expressed concern" with SkyCity's reinvestment strategy for some time.
"But we haven't gone out of our way over the last three months to recommunicate those concerns. They have been consistent messages that we've given the management team for a couple of years at least."
Robertshawe said Tower believed the change could have been handled more deftly.
"It might have been time to announce a managed transition process with the change of strategy. In our view, it's reasonably difficult for a chief executive who's executed an acquisition strategy to be told to turn around and unwind it."
Forsyth Barr analyst Jeremy Simpson said: "The board's showing it's committed to its new strategic direction and decided it's more appropriate for a new CEO to drive that."
McGeoch said Davies, whose involvement with the company extended back to its launch more than 11 years ago, was pivotal in its development into, "a truly diversified transtasman entertainment company".
Under Davies' leadership, SkyCity bought into cinemas, other casinos in New Zealand and Australia and internet gaming company Canbet.
During the past couple of years, the strategy has been increasingly criticised by investors and commentators who say it has been at the expense of the company's key cash generator, the SkyCity Auckland operation, which has been underperforming.
Earlier this year, the company had posted a weak interim result and, last month, said was comfortable with analyst forecasts of $98 million this year in comparison with its 2006 net profit of $120.1 million.
