Listed investment company Infratil is not taking a backward step even as it comes under heavy fire amid a takeover attempt from across the Tasman.
Major investor ACC said the infrastructure company needed to engage with AustralianSuper over its $5.4 billion takeover offer, revealed this week. In an NZX filing, Infratil said it had no plans to do so.
And The Australian columnist John Durie took aim at the cut of profits taken by HRL Morrison & Co - the management company that runs Infratil and earns about $155 million a year in fees from the company.
"The model opens the door to value leakage with listed company shareholders handing money across to the privately-owned Morrison run by the same person, [Marko] Bogoievski … if Australian Super wins control, Morrison will lose its lifeblood.
"Whose money is the board trying to protect?" with its rejection of AusSuper's offer, Durie asked.
NZ Shareholders' Association chief executive Oliver Mander raised the same potential conflict of interest issue, telling the Herald, "Morrison is pretty intertwined with Infratil and the management fees are significant".
Infratil's assets include half-shares in Vodafone NZ, Canberra Data Centres and TrustPower, a majority stake in Wellington International Airport, 50 per cent of retirement village operator RetireAustralia, 60 per cent of Australian radiology chain QScan, and majority stakes in clean energy companies Tilt and Longroad.
Infratil chairman Mark Tume told the Herald that AusSuper's offer - which represented a 28 per cent premium on Infratil's closing price last Friday, had been independently assessed by Goldman Sachs and MinterEllisonRuddWatts.
And while Bogoievski - who serves as Infratil CEO and Morrison & Co CEO - is a non-independent director, the others (Tume himself plus Alison Gerry, Paul Gough, Kirsty Mactaggart, Catherine Savage and Peter Springford) were independent.
"Infratil has a very experienced and independent board. Six of seven directors are independent," he said.
There is a degree of intertwinement between Infratil, Morrison and various Infratil holdings.
Phillippa Harford is chief financial officer of Infratil and on Morrison & Co's executive team, for example. She also sits on the boards of two Infratil holdings, RetireAustralia and Wellington International Airport The airport's chairman, Tim Brown, is also in charge of Morrison's regulation, debt and capital markets activities. Morrison's head of Europe, Jason Boyes, is also chairman of Infratil holding Longroad Energy. Morrison's property head Peter Coman is also chairman of RetireAustralia and a director of TrustPower.
But Infratil is not necessarily Morrison's "lifeblood". A spokesman for the privately-held management company said, "Infratil represents around 29 per cent of Morrison and Co's funds under management. Morrison and Co manages around $17 billion, so more than 70 per cent of its business is elsewhere.
"Infratil is an important client, but it is one of many important Morrison and Co clients made up of a number of New Zealand, Australian and International companies and investors."
And while The Australian's Durie wrote, "The external management model has largely gone out of favour ... scrapping fees is an easy win", Tume strongly defended the model.
"The independent board has continued to use the services of Morrison and Co as manager because of the outstanding performance over 26-plus years," the Infratil chairman told the Herald.
"It is important to remember that Infratil's 18 per cent return per annum over 26 years is after tax and after all management and performance fees," he added.
"It is hard to think of another investment company – local or offshore - which has returned the results which Infratil has and it is one of the reasons why Infratil is such an attractive asset."
In 2018, the board established a separate manager engagement committee, which is limited to independent directors, to monitor Morrison & Co's performance and manage any potential conflicts between Infratil's shareholders and Morrison & Co on an ongoing basis, Tume said.
"Infratil's directors regularly review the mandate and are firmly of the view that it represents good value for all shareholders. The most recent review was conducted earlier this year by independent financial experts Fidato Advisory," he added.
"They found 'the current remuneration structure under the Agreement has, in totality, been demonstrably beneficial to Infratil shareholders over the 26 years'."
At Infratil's annual meeting in August, Tume also raised the Fidata review as ACC tried to rally support against a motion for Morrison to be paid an instalment of its annual fee (which in the end gained just 13.9 per cent support at a muted, virtual AGM with investor questions read out by Gerry, with no facility for followups).
What of the Infratil board's Wednesday statement that "No further engagement is planned [with AusSuper] at this time"?
"As it always has, the Infratil Board will continue to consider all portfolio options and proposals that maximise shareholder value," Tume told the Herald today.
"A subcommittee of independent directors, excluding Mr Bogoievski, has been set up to assess AustralianSuper's offer," he added.
Punakaiki Fund director Lance Wiggs, whose fund has no money in Infratil but who has been watching events closely, told the Herald it was likely that Infratil was undervalued.
Infratil's board had "an obligation to engage and work the deal out as much as they can, in order to maximise value to shareholders".
But neither did Wiggs see the board's cold-shoulder statement as a sign of conflict of interest. It was likely just a negotiating tactic in what could become a protracted bidding war.
"They may be thinking, 'let's just keep them at arm's length until we get an offer that we can find acceptable, or at least engageable'."
Infratil shares, - $5.40 last Friday, closed today at $7.22 (for a market value of $5.2b) - still shy of AusSuper's implied price (after a Trustpower shares side-deal) of $7.43 under its $5.4b offer. The stock is up 46 per cent for the year.