Battle lines drawn in fight for Fairfax

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This was published 14 years ago

Battle lines drawn in fight for Fairfax

By Dan Oakes and John Huxley

A BITTER war has broken out for control of the Fairfax Media board, with chairman Ron Walker accusing influential director John B. Fairfax of hypocrisy, deceiving the board and driving down the share price.

Independent directors are likely to stand beside Mr Walker during his bid for re-election at the company's annual meeting in November. John B. Fairfax last night denied he wanted to be chairman of the company.

The opening salvo in yesterday's battle was fired by the Fairfaxes just hours after Mr Walker said he would stay on until August next year.

The Fairfaxes' private company, Marinya Media, which owns 9.7 per cent of Fairfax Media, said it would vote to dump Mr Walker in November, citing "significant shareholder dissatisfaction with his performance".

In a blistering statement, the company said: "Marinya, for one, cannot see how Mr Walker's stated intention to delay his retirement assists the company or its shareholders."

However, later Mr Walker hit back. "Let there be no misunderstanding. This is a ploy by the Fairfax family to get control of the company without paying a premium to other shareholders, and the independent directors will act responsibly in the interest of all shareholders to prevent this."

Board member David Evans, one of five independent directors, told the Herald the rest of the board – bar the Fairfaxes – would release a statement today supporting Mr Walker, and endorse his steering of the company since he took the helm in 2005.

"John B. Fairfax bought his brother and sister's stock back from them, then he had a margin call from Commsec for $400 million-plus. He secured a loan by pledging the Fairfax stock without disclosing this to the board," Mr Evans said last night.

"Shorts [short sellers] and hedge funds carved up the stock to the tune of $2. The board insisted that he remedy that, he secured a loan from elsewhere to remedy it."

Nicholas Fairfax rejected these claims late last night. "Marinya cannot see how having two board seats constitutes having control, especially as Mr Fairfax does not seek the chairmanship," he said.

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On the margin loans, he said Marinya was a diverse company whose most liquid stock was Fairfax. "We have always had a conservative amount of debt, and when we became aware the margin loan became an issue we swiftly made other financing arrangements to take it off the table. At that time there was no legal obligation to inform the board," he said.

Marinya earlier said it could see no sound case for extending Mr Walker's tenure, particularly against the background of rapid industry changes. "It unnecessarily defers the commencement of the much-needed process of board and leadership renewal and we consider it inappropriate that a departing chairman would be influential in the choice of new directors."

"Renewal must start today . . . after years of under-performance, Fairfax Media has a new management team, a streamlined cost-base and is poised to rebuild some of the shareholder value that has been destroyed."

Since Mr Walker became chairman in 2005, the share price has tumbled 60 per cent from $4.34 to $1.72.

Marinya also accused the present leadership of paying inadequate attention to matters of corporate governance.

"During the four-year period of Mr Walker's chairmanship, an unacceptable degree of risk was introduced to the company's structure through a series of debt-funded acquisitions."

Mr Walker also accused Mr Fairfax of hypocrisy and poor corporate governance by failing to disclose critical details about his shareholding in the company.

"John B. Fairfax's comments about corporate governance are hypocrisy at its worst, when you consider that he deceived the board in not disclosing he had a margin loan on hundreds of millions of dollars worth of shares that caused our share price to drop at the hands of hedge funds and short sellers."

Mr Evans backed his board ally, Mr Walker.

"I find the Fairfaxes' move to be utterly perplexing . . . I don't know where they're coming from, and if they wanted to make a move that would damage the company, then that's what they've done. I'm horrified."

Mr Evans said he had spoken to institutional investors and they were overwhelmingly positive about Mr Walker's leadership.

John B. Fairfax said the decision to oppose Mr Walker had not been taken lightly. "It is uncharacteristic. It is not personal. Fairfax Media is a great company and is fundamental to our democratic process."

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The unrest is believed to have been brought to crisis point by the appointment as deputy chairman – and thereby heir apparent – of former Woolworths chief executive Roger Corbett.

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