Rubicon

Apologies to readers for last week's expose on Rubicon and the ill-fated decision by the board of Allco to acquire the financial engineer late last year for $260 million. (It had been priced at $320 million-plus before Allco shares fell.)

We erred in not consulting the Grant Samuel "independent expert's'' report closely enough and have been put on the right track by a fine contact. The Rubicon owners - Gordon Fell, Mat Cooper, David Coe and Allco - actually pulled out a quick dividend of $13.5 million on top of their $63.7 million in cash as part of the deal. This would be labelled by the cognoscenti as a "clearing dividend''.

Cash out to the boys was in fact $77.2 million. Or was it? There is no detail of the actual contract in the GS report and since the deal was struck on December 31, but struck on June 30 numbers, neither the management fees for six months, nor the operating revenues of Rubicon, are disclosed.

You have to look long and hard but it seems that Rubicon may also have been in negative working capital territory when the deal was done, which is a shame because businesses generally require working capital to fund their operations. And it's pure supposition but banker NAB, which ironically pulled the pin last month, may have also been the provider of capital to the boys to run Rubicon.

And another thing: buried in the report (whose disclosed cost was $375,000) was $7 million in transaction fees. Wonder who got those? And why?

PMP

Stung by the defection of its key junk mail account, Coles, to rival Salmat, an emergency board meeting has been called at PMP for later this week.

In his release to the ASX last Thursday, CEO Brian Evans framed the loss as "PMP have (sic) declined approximately $8 million of catalogue printing working work from the Coles group ...'' PMP saw upside in concentrating on other opportunities, and so forth.

There is a bit more to the story, however, than the "business as usual'' rhetoric would suggest, even claims of malfeasance.

Delays and production problems in the printing business, including loss of volume to rivals, is merely one aspect. PMP has even had to resort to its rivals to pull off a couple of print jobs to avoid late delivery penalties and has invited consultants Booz Allen to crawl about the business - the outcome is believed to recommend a "back to basics'' program in manufacturing.

It does not help that most of the executive team has left for the competition, both print and distribution. But of more concern are the reasons behind the Coles decision. The PMP board was told about allegations of the service reports to Coles and other customers overstating delivery levels. Nothing has apparently been done about it yet, though there promises to be an abundance of work for the teeming brigades of lawyers and consultants who will be reporting to the board this week or next.

Joe - not his real name - shifted his pension to Storm Financial group at the behest of his advisor a year ago. Leverage and fees have wiped out 90% of his savings. Joe had been "Stormised'' as they call it, that is, his personal balance sheet had been "optimised'' to take advantage of the opportunity for great wealth in the rising stockmarket.

Storm is now in a storm of its own and has - fee-conscious to the nth-degree - advised its clients to sell shares but hang on to the debt. Not paying down their borrowings means more fees for Storm - on top of the 7% for the pleasure - and now pain - of being Stormised. Continued…