ASX Release 27 April 2009 BABCOCK & BROWN CAPITAL – GENERAL MEETING CHAIRMAN’S ADDRESS AND PRESENTATION Please see attached the Chairman’s address and presentation which is being made today at the General Meeting of Babcock & Brown Capital Limited. ENDS Andrew Day Erica Borgelt Chief Executive Officer Investor Relations Babcock & Brown Capital Babcock & Brown Capital +44 20 7203 7328 +61 2 9229 1800 For personal use only
29
Embed
Pitchbook A4 template - asx.com.au · PDF fileadvisors, UBS Investment Bank. These Proposals are from international financial and strategic groups and, on the basis of their Proposals,
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
ASX Release
27 April 2009 BABCOCK & BROWN CAPITAL – GENERAL MEETING CHAIRMAN’S ADDRESS AND PRESENTATION Please see attached the Chairman’s address and presentation which is being made today at the General Meeting of Babcock & Brown Capital Limited. ENDS Andrew Day Erica Borgelt Chief Executive Officer Investor Relations Babcock & Brown Capital Babcock & Brown Capital +44 20 7203 7328 +61 2 9229 1800
For
per
sona
l use
onl
y
1
CHAIRMAN’S ADDRESS
Babcock & Brown Capital
2009 General Meeting
11am, 27 April 2009
Museum of Sydney - Auditorium, 37 Phillip Street WELCOME
Good morning ladies and gentlemen. My name is Kerry Roxburgh and, as your
Chairman, I would like to welcome you to this general meeting of BCM Shareholders.
Before I go any further, I would be grateful if you could all please check to see that
your mobile phones have been switched off.
I have been informed that a quorum is present and accordingly, as Chairman of the
Meeting, I declare the meeting open and on behalf of the Board I welcome you and
thankyou for making time available to be here today.
The Notice of Meeting has been distributed and, I propose that the Notice of Meeting
be taken as read.
A broad outline of today’s meeting is as follows:
• I will introduce my fellow Directors, our Chief Executive Officer, the Chief
Financial Officer and the Company Secretary to the meeting.
• As Chairman I will make some opening remarks and provide a brief strategic
update following my letter to Shareholders last week.
• We will then move to consider the formal items as outlined in the Notice of
Meeting. Shareholders will be given the opportunity to ask questions after each
resolution has been proposed and seconded and again we will allow time for
more general questions after the formal business has concluded.
For
per
sona
l use
onl
y
2
INTRODUCTION
I’d like to introduce my fellow Directors who are seated at the top table.
• Mr Andrew Day, our CEO and Executive Director based in London;
• Dr Gregory Clark who is an Independent Director and is also a member of the
Nomination, Governance & Remuneration Committee; and
• Andrew Love who is an Independent Director and also Chairman of the Audit,
Risk & Compliance Committee.
I might add that I am also an Independent Director, a member of the Audit, Risk &
Compliance Committee, and Chairman of the Nomination, Governance &
Remuneration Committee.
Also seated at the top table is Frank Giordano our Company Secretary and seated in
the front row is Haydn Vella, our CFO.
Today’s meeting will bring some certainty with regard to BCM either becoming a
stand-alone entity, separate from Babcock & Brown or one that continues to
outsource its management to Babcock & Brown.
MANAGEMENT INTERNALISATION PROPOSAL
I’d like to spend a little time providing some background and comments on the
management internalisation proposal as this is afterall the main reason we are here
today.
On 28 August 2008, BCM announced that it had commenced discussions with
Babcock & Brown Group about internalisation of its management which would see
BCM become a stand-alone investment company with its own management structure
and it would no longer outsource its management to Babcock & Brown.
Following these discussions, on 10 November 2008, the Company announced that it
had entered into an agreement that, subject to Shareholder approval, would result in
termination of the Management Agreement and the associated Advisory Agreement.
Under this agreement, a total of $50 million could become payable to Babcock &
Brown. On termination of the Management Agreement $32.5 million would have been
For
per
sona
l use
onl
y
3
payable followed by a $12.5 million payment contingent on there being a change in
control of the Company or eircom before 30 April 2010. $5 million was also payable
for advisory services in relation to BCM’s review process, also contingent on there
being a change in control of the Company or eircom before 30 April 2010.
Since that time, primarily driven by a material reduction in BCM’s consolidated net
assets as at 31 December 2008, the Board concluded that it would not be
recommending the Management Internalisation Proposal agreed in November 2008
to Shareholders, because, after completion of BCM’s half year accounts to 31
December 2008 the amount payable to the Manager under the Management
Agreement is now limited to reimbursement of the Manager’s costs of performing the
services under the Management Agreement.
As a result, a revised internalisation proposal was negotiated.
In summary, the consideration now payable by BCM for termination of the
Management Agreement and the associated Advisory Agreement is a one off
payment of $5 million. Also, and in recognition that its resources are becoming more
constrained, BCM will no longer continue with the appointment of BBA as financial
adviser in relation to the Company’s review process that may lead to a change in
control of BCM.
Shareholders are being asked today to consider and, if thought fit, approve the
revised terms of the Management Internalisation Proposal. The BCM Directors
commissioned an independent expert, KPMG Corporate Finance, to provide an
opinion as to whether the revised terms of the Management Internalisation Proposal
were in the best interests of BCM Shareholders. KPMG concluded that the revised
proposal is in the best interests of BCM Shareholders. A copy of KPMG’s report was
enclosed with the Notice of Meeting that all Shareholders will have seen.
The BCM Board agree with the opinion of the Independent Expert, and in order to
bring to an end the current outsourced management model which has performed
poorly, the BCM Directors unanimously recommend that Shareholders vote in favour
of the Management Internalisation Proposal.
We see the key advantages for Shareholders if the Management Internalisation
Proposal is approved include:
For
per
sona
l use
onl
y
4
• the Company will become a standalone entity, separate from Babcock & Brown,
with no links ongoing to Babcock & Brown apart from those services provided
under the Transitional Services Agreement for the period that agreement remains
in place. This agreement can be terminated by either party on one months notice;
• the Company will no longer be liable to pay management fees or performance
fees to the Manager;
• the Company will no longer be subject to the Advisory Agreement with BBA;
• the Board will be able to hold management accountable for its actions;
• the Board will be better positioned to develop and review proposals that may lead
to a change in control of BCM; and
• the Board will be able to determine the future direction and strategy of the
Company, without the need to first receive a recommendation from the Manager.
If Resolution 2 being voted on today is passed, the name of the Company will change
to eircom Holdings Limited with the ASX ticker code ERC.
As I said in my most recent letter to Shareholders, we have received a number of
proposals from third parties who have expressed interest in the potential acquisition
of BCM. I note that none of these proposals envisages that Babcock & Brown should
remain as the Manager of BCM.
In the event that BCM Shareholders approve the Management Internalisation
Proposal, BCM will be managed by a small, disciplined executive team employed
directly by the Company, under the direction of BCM CEO, Andrew Day and fully
accountable to the BCM Board.
If BCM Shareholders do not approve the Management Internalisation Proposal,
Babcock & Brown Capital Management Pty Limited will continue to manage the
Company in accordance with the existing Management Agreement and, in those
circumstances, there can be no guarantee that BCM will have another opportunity to
terminate the Management Agreement, and separate from Babcock & Brown, in the
near future. The BCM Board does not consider this outcome to be in BCM
Shareholders’ best interests.
I would also note that termination of the Management Agreement does not trigger
any default or change of control provisions in the eircom debt facilities.
For
per
sona
l use
onl
y
5
STRATEGIC UPDATE: OBJECTIVES
I will now briefly update you on the matters covered in last week’s letter to
Shareholders.
The Board’s overriding objective has always been, and will continue to be, to
maximise value for BCM Shareholders.
Recognising the substantial impact of the Global Financial Crisis, BCM’s key
priorities have been and remain:
• to bring to an end the current outsourced management arrangements that have
failed so far to deliver value to Shareholders;
• at eircom, to restore the Company’s tarnished reputation and its relationship with
eircom stakeholders (including the eircom Board, its employee share ownership
trust known as the ESOT, employee unions, the regulator and the Irish
Government) and to finalise its search for a new CEO and to constructively
address its operational performance issues;
• to realise the Golden Pages investment;
• to return surplus capital to Shareholders; and
• to develop a proposal for Shareholder consideration involving a change of control
of BCM that reflects appropriate value for BCM’s controlling stake in eircom, in
excess of BCM’s cash backing of approximately $1.05 per share
Each of these priorities is well advanced, and if Shareholders vote to internalise
management, this will greatly assist the Board to deliver value to BCM Shareholders.
STRATEGIC UPDATE: REVIEW PROCESS
This Review Process has been ongoing for several months. As part of this process
the BCM Board has:
• initiated a process for the sale of Golden Pages and discussions are ongoing
with bondholders and potential acquirors; and
• received a number of proposals from third parties who have expressed interest
in the potential acquisition of BCM (Proposals). The TaemasBridge proposal,
disclosed to ASX on 16 April 2009, is one such proposal recently received by
the Company.
For
per
sona
l use
onl
y
6
Several Proposals are being considered by the BCM Board with the assistance of its
advisors, UBS Investment Bank. These Proposals are from international financial
and strategic groups and, on the basis of their Proposals, a number of these groups
have been invited to conduct further due diligence on eircom and BCM , and have
been provided with access to a virtual dataroom for this purpose.
As I have said before, the Board requires that any proposal involving a change of
control of BCM needs to reflect an appropriate value for BCM’s controlling stake in
eircom that is in excess of BCM’s cash backing of approximately $1.05 per share
(unaudited).
As I said earlier, each of the Proposals we are considering is non-binding, incomplete
and, with the exception of the TaemasBridge Proposal, they are confidential. BCM
can give no assurance that a change of control transaction will eventuate from this
Review Process or from any Proposal, but it remains committed to exploring these
Proposals in the best interests of all Shareholders.
If by 30 June 2009 a change of control proposal that has received a Board
recommendation has not been announced by BCM then, subject to capital markets
conditions, the Board’s current objective is to pursue a restructure of BCM’s interest
in eircom to establish a more sustainable capital structure for eircom, to simplify its
ownership structure and to negotiate with the ESOT to replace the current constraints
contained in the eircom shareholder agreement with improved governance and
performance accountability arrangements.
Working with the eircom Board and management, with the benefit of his extensive
telco experience, BCM’s CEO Andrew Day is now actively engaged with eircom.
I am pleased to say the revisions to eircom’s operational plan is well developed,
involving:
1. A substantial cost reduction plan to better position eircom’s competitive position
in Ireland and to balance possible revenue weakness during the current
economic environment. Cost reduction initiatives have been fully analysed with a
view to continued implementation over the coming quarters;
For
per
sona
l use
onl
y
7
2. A strengthening of the advanced technology position of eircom building off the
recent and successful wireless broadband launch and increased speeds for fixed
broadband access, potentially involving fibre access closer to the customer; and
3. A substantial improvement in eircom's wireless competitive positioning especially
in the premium consumer and business sectors. eircom currently has minimal
market share of these sectors but is well positioned to take market share.
Over the next two months these broad strategic directions for eircom will be further
developed and added to by the eircom Board and management deliberations in
which BCM’s CEO, Andrew Day will be actively involved. These developments are
expected to substantially increase eircom's competitiveness in Ireland leading to
further Shareholder value creation as the economic position of Ireland corrects itself.
STRATEGIC UPDATE - CAPITAL MANAGEMENT INITIATIVES
In the event that a sufficiently attractive change of control proposal is not announced
before 30 June 2009 and the Management Internalisation Proposal is approved, the
BCM Board intends to return to Shareholders BCM’s surplus capital after retaining a
prudent capital reserve in the region of $40 million. The Board intends to convene a
meeting of Shareholders in July 2009 to consider a second return of capital this year,
which is expected to be made at around the time BCM releases its 30 June 2009
results.
Before calling this meeting, BCM’s surplus capital will be determined after taking into
consideration BCM’s liabilities. Based on available cash, receivables and known
liabilities as at 31 March 2009, approximately $135 million or $0.80 per BCM Share
should be available to return BCM Shareholders.
If at any time before 30 June 2009, the BCM Board considers that the Review
Process is not likely to lead to a change of control proposal for BCM that the BCM
Board would be prepared to recommend, then this return of capital proposal will be
brought forward in time.
For
per
sona
l use
onl
y
8
STRATEGIC UPDATE - SALE OF GOLDEN PAGES
As previously announced, the Board is seeking to dispose of BCM’s investment in
Golden Pages. Discussions with the bondholders and various parties in relation to
the sale of Golden Pages continue. The sale of Golden Pages is unlikely to impact
the strategies referred to earlier.
The Golden Pages bondholders have agreed to waive any debt covenant breach for
three months while a restructuring with potential buyers is negotiated. The non-cash
loss recorded at 31 December 2009 resulted in the equity value falling below the
threshold required under the bond covenants.
TAEMASBRIDGE PROPOSAL
The BCM Board has requested from Mr Robert Topfer clarifications of the
TaemasBridge proposal that was released to ASX on 16 April 2009.
Whilst the BCM Board is prepared to continue to consider that proposal, the Board
notes that there are a number of elements, including the requirement that BCM lends
to Liffey Bridge most of the cash consideration that is to be provided under the
proposal, that make it unacceptable in its current form.
Importantly, the BCM Board considers that the TaemasBridge proposal does not
change its recommendation that Shareholders vote in favour of the Management
Internalisation Proposal, and that the TaemasBridge proposal is itself independent of
this outcome.
FORMAL BUSINESS
It is now time to proceed with the formal business of the meeting. As stated in the
Notice of Meeting, the business of today’s meeting is to consider and if thought fit to:
1. pass the resolution to authorise the Company to terminate the Management
Agreement and the Advisory Agreement and to make a payment of $5 million
to the Manager;
2. pass the resolution to change the Company name;
For
per
sona
l use
onl
y
9
3. pass the resolution to approve the issue of share performance rights to Mr
Andrew Day, Executive Director and CEO; and
4. pass the resolution to approve termination benefits being paid to Mr Andrew
Day, Executive Director and CEO.
For
per
sona
l use
onl
y
Babcock & Brown Capital General Meeting 27 April 2009
For
per
sona
l use
onl
y
1
CONTENTS
1. Welcome
2. Management Internalisation Proposal
3. Strategic Update
4. TaemasBridge Proposal
5. EGM Formal Business
6. Close
For
per
sona
l use
onl
y
2
INTRODUCTION
Kerry Roxburgh Independent Chairman
Andrew Day Chief Executive Officer & Executive Director
Greg Clark Non Executive Director
Andrew Love Non Executive Director
Haydn Vella Chief Financial Officer
Frank Giordano Company Secretary
For
per
sona
l use
onl
y
3
CONTENTS
1. Welcome
2. Management Internalisation Proposal
3. Strategic Update
4. TaemasBridge Proposal
5. EGM Formal Business
6. Close
For
per
sona
l use
onl
y
4
MANAGEMENT INTERNALISATION PROPOSAL
Background
• Agreement reached with Babcock & Brown for consideration of one-off payment of A$5 million
• Funded from BCM’s existing cash reserves• Independent Expert concluded that in best interests of Shareholders
Rationale
• Shareholder desire for an independent BCM, whose management is no longer outsourced
• BCM becomes stand-alone entity, separated from Babcock & Brown• No longer required to seek the “manager’s recommendation”• No longer liable to pay management or performance fees• No longer subject to Advisory Agreement with Babcock & Brown• Clears the way for proposals to be developed that may lead to a change in
control• Independently able to determine the future direction and strategy of the
Company
Proposed New Management Structure
• BCM to be managed by small executive team directly employed by the Company and under direction of the CEO, responsible to the Board
• Termination of the Management Agreement does not trigger any default or a change of control provisions in eircom debt facilities
• Proposed change of name to eircom Holdings Limited (ASX ticker ERC)
For
per
sona
l use
onl
y
5
CONTENTS
1. Welcome
2. Management Internalisation Proposal
3. Strategic Update
4. TaemasBridge Proposal
5. EGM Formal Business
6. Close
For
per
sona
l use
onl
y
6
STRATEGIC UPDATE: OBJECTIVES
Key Objective • Maximise value for BCM Shareholders
Key Priorities
• Bring to an end the current outsourced management arrangements that have failed so far to deliver value to Shareholders
• At eircom, to restore the company’s tarnished reputation and its relationship with eircom stakeholders (including the eircom Board, its employee share ownership trust known as the ESOT, employee unions, the regulator and the Irish Government)
• To finalise its search for a new eircom CEO and to constructively address its operational performance issues
• To realise the Golden Pages investment
• to return surplus capital to Shareholders
• To develop a proposal for Shareholder consideration involving a change of control of BCM that reflects appropriate value for BCM’s controlling stake in eircom, in excess of BCM’s cash backing of approximately $1.05 per share
For
per
sona
l use
onl
y
7
STRATEGIC UPDATE: REVIEW PROCESS
Overview• Initiated process for the sale of Golden Pages – discussions with bondholders and potential acquirers
ongoing
• Proposals received from 3rd parties who have expressed interest in the potential acquisition of BCM
Process
• Several incomplete and confidential proposals received from international and strategic groups
• A number of groups have been invited to conduct further due diligence on eircom and BCM, and have been provided access to a virtual dataroom for this purpose
• Process has support of ESOT and eircom management
• Board requires any proposal involving change of control of BCM needs to reflect appropriate value for BCM’s controlling stake in eircom, in excess of BCM’s cash backing of approximately A$1.05 (unaudited) per share
• Proposals received to date are non-binding, incomplete and with exception of TaemasBridge proposal, confidential
• No assurance can be given that a change of control transaction will eventuate from Review Process or any Proposal, but Board remains committed to exploring proposals in best interests of all Shareholders
• Aim to have proposal for Shareholders to consider by 30 June 2009
• If no change of control proposal for BCM has been announced before 30 June 2009, subject to capital markets conditions, objective will be to pursue a restructure of BCM’s interest in eircom to establish more sustainable capital structure for eircom, simplify ownership structure and replace current constraints contained in the eircom shareholder agreement with improved governance and performance accountability arrangements
For
per
sona
l use
onl
y
8
STRATEGIC UPDATE: CAPITAL MANAGEMENT INITIATIVE
Liquid Asset Position
• Approximately A$175 million (equivalent to ~$1.05 (unaudited) per BCM share)
• After taking into account:– the recent capital return of $100.7 million; – the net effect of $42 million cost of the closing out BCM’s derivative
position; and– the proposed $5 million one-off payment to terminate the existing
outsourced Management Agreement
Investment Reserves
• If no suitable change of control proposal announced before 30 June 2009, Board intends to return approximately A$135 million (A$0.80 per BCM share) dependent on available cash, receivables and known liabilities
• ~ A$40 million to be retained as prudent reserve
• Shareholder meeting to be convened in July 2009 to consider second capital return
• Return of capital plan brought forward if Board considers Review Process unlikely to lead to change of control proposal before 30 June 2009F
or p
erso
nal u
se o
nly
9
STRATEGIC UPDATE: SALE OF GOLDEN PAGES
Sale Process
• Discussions with bondholders and various parties continue
• By 30 June 2009, BCM to be advanced in strategy to dispose of 100% of its investment in Golden Pages
• No further equity will be invested in Golden Pages and BCM’s capital management proposal reflects this position
Bondholders
• Bondholders have agreed to waive any debt covenant breach for three months while a restructuring with potential buyers is negotiated
• Non-cash loss recorded at 31 December 2008 resulted in equity position falling below threshold required under the bond covenants
For
per
sona
l use
onl
y
10
CONTENTS
1. Welcome
2. Management Internalisation Proposal
3. Strategic Update
4. TaemasBridge Proposal
5. EGM Formal Business
6. Close
For
per
sona
l use
onl
y
11
TAEMASBRIDGE PROPOSAL
Board Considerations
• Clarification requested of the TaemasBridge proposal released to ASX on 16 April 2009
• Proposal will be considered, however a number of elements are viewed as unacceptable in current form, including requirement that BCM lends to Liffey Bridge most of the cash consideration that is to be provided under the proposal
• TaemasBridge proposal does not change Board recommendation that Shareholders vote in favour of the Management Internalisation Proposal
• TaemasBridge proposal is independent of the outcome of Management Internalisation
For
per
sona
l use
onl
y
12
CONTENTS
1. Welcome
2. Management Internalisation Proposal
3. Strategic Update
4. TaemasBridge Proposal
5. EGM Formal Business
6. Close
For
per
sona
l use
onl
y
13
ORDINARY BUSINESS
RESOLUTION 1 – TERMINATION OF THE MANAGEMENT AGREEMENT
To consider and, if thought fit, to pass the following resolution as an ordinary resolution:
“That the Company be authorised to:• termination the Management Agreement between the Company, Babcock & Brown Capital
Management Pty Limited and Babcock & Brown Securities Pty Limited;
• terminate the Advisory Agreement between the Company and Babcock & Brown Australia Limited; and
• make a payment of $5,000,000 to Babcock & Brown Capital Management Pty Limited,
in accordance with the terms of the Termination Agreement, a summary of which is set out in the accompanying Explanatory Statement.”
For
per
sona
l use
onl
y
15
ORDINARY BUSINESS
RESOLUTION 2 – CHANGE OF NAME
To consider and, if thought fit, to pass the following resolution as a special resolution:
“That, subject to Resolution 1 being passed and for the purposes of section 157(1) of the Corporations Act and for all other purposes, the Company change its name to ‘eircom Holdings Limited’ and the Company’s Constitution be amended accordingly.”
For
per
sona
l use
onl
y
17
ORDINARY BUSINESS
RESOLUTION 3 – ISSUE OF SHARE PERFORMANCE RIGHTS TO MR ANDREW DAY, EXECUTIVE DIRECTOR AND CEO
To consider and, if thought fit, to pass the following resolution as an ordinary resolution:
“That for the purposes of ASX Listing Rule 10.14 and for all other purposes, approval be given for the issue of share performance rights to Mr Andrew Day, Executive Director and Chief Executive Officer of the Company, on the terms described in the Explanatory Statement.”
For
per
sona
l use
onl
y
19
ORDINARY BUSINESS
RESOLUTION 4 – APPROVAL OF TERMINATION BENEFITS PAYABLE TO MR ANDREW DAY, EXECUTIVE DIRECTOR AND CEO
To consider and, if thought fit, to pass the following resolution as an ordinary resolution:
“That for the purposes of ASX Listing Rule 10.19 section 200E of the Corporations Act and for all other purposes, the Company approves the benefits which may become payable to Mr Andrew Day on termination of his employment in accordance with the Executive service Agreement as described in the Explanatory Statement.”
For
per
sona
l use
onl
y
21
CONTENTS
1. Welcome
2. Management Internalisation Proposal
3. Strategic Update
4. TaemasBridge Proposal
5. EGM Formal Business
6. Close
For
per
sona
l use
onl
y
22
The information contained in this presentation is given without any liability whatsoever to Babcock & Brown Capital Limited or any of its related entities (collectively “BCM”) or their respective directors or officers, and is not intended to constitute legal, tax or accounting advice or opinion. No representation or warranty, expressed or implied, is made as to the accuracy, completeness or thoroughness of the content of the information. The recipient should consult with its own legal, tax or accounting advisers as to the accuracy and application of the information contained herein and should conduct its own due diligence and other enquiries in relation to such information.
The information in this presentation has not been independently verified by BCM. BCM disclaims any responsibility for any errors or omissions in such information, including the financial calculations, projections and forecasts set forth herein. No representation or warranty is made by or on behalf of BCM that any projection, forecast, calculation, forward-looking statement, assumption or estimate contained in this presentation should or will be achieved.
Please note that, in providing this presentation, BCM has not considered the objectives, financial position or needs of the recipient. The recipient should obtain and rely on its own professional advice from its tax, legal, accounting and other professional advisers in respect of the addressee’s objectives, financial position or needs.
This presentation does not carry any right of publication. This presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by BCM. Neither this presentation nor any of its contents may be reproduced or used for any other purpose without the prior written consent of BCM.