The International Wine Investment Fund (IWI), of which Perennial Investments founder Ian Macoun is managing director-designate, will vote on its future next month in what is shaping up as a cliffhanger.
The board and Macoun today issued a letter to shareholders arguing their preferred course of action, which includes the internalising of IWI’s management company, Berren, and the permanent employment of Macoun.
The cost of the latter proposal has outraged many shareholders — Macoun will receive a base salary of $330,000 plus bonuses, an interest-free loan to buy 3.5 million shares at $1.90 (the stock has an NTA of $2.90), and a payment of $500,000 if his appointment is rejected, on the basis he set aside a planned boutique funds management holding company to take the job at IWI.
The internalisation of Berren, which has several owners in common with IWI, has been described as “another transfer of value out of the business to management” by major shareholder Dominic McCormick, whose Select Asset Management holds 5.3 per cent of IWI.
“It’s a circular argument — they’ve put a big price tag on Berren, and they stand to benefit if IWI buys it, but if the proposal is voted down then the company is worthless because it’s got no other assets under management,” McCormick says.
However, the board’s letter to shareholders has highlighted the conflicts and disruption inherent in continuing with an external management company, and argued that no-one with Macoun’s financial skills would come cheaply.
The board needs 75 per cent shareholder approval at a March 9 meeting for its proposal to proceed, but a 13 per cent block represented by Hunter Valley accountant Gary Mares, and Select, are likely to vote against it in its current form.
The board’s letter said a subsequent wind-up of IWI would result in a “fire sale” with “good assets being sold at knock down prices”, but Select’s McCormick rejected this.
“Their big listed investments in Constellation, Fosters and McGuigan are all very liquid…the unlisted investments are only $30 million of the $170 million total assets, and they don’t have to be sold quickly.”
The result could hinge on new 9.1 per cent shareholder, Isle Of Man-based Laxey Partners, which only declared its stake this week.
The group is known as an active value investor in listed investment companies, with a reputation for realising profits quickly.
