We believe the ASX is failing to protect the rights of investors.
When Australia’s largest wealth manager AMP Ltd announced it would sell its life insurance arm at a discount to its previously disclosed embedded value, we, and others, initially spoke out against the controversial deal on valuation grounds.
Fast forward two weeks and it was just plain wrong that, despite concerns from shareholders, the ASX ruled, not once but twice, that AMP’s decision to sell its life business did not require shareholder approval, as per its listing rules.
In this instance, it appears that the ASX is favouring a select group of advisers ahead of shareholders. You cannot have a functioning market unless shareholder rights and governance are at the forefront, and this is a blatant example of where this has fallen over.
The businesses sold accounted for well in excess of half of the total value of AMP in the eyes of the sharemarket. This is evidenced by its pre-sale market capitalisation of approximately $10 billion, the 25% fall in market capitalisation on the day of the announcement and the total proceeds of $3.1 billion. These proceeds plus the fall in stock market capitalisation as a result of this deal, accounted for more than 50% of the pre-deal market capitalisation – a clear indication that this was a material transaction and AMP’s main undertaking.
We are well known for our independent, long-term, contrarian investment approach. We are active shareholders and have always approached regulators to ensure client interests are met. We will continue to do so.
We remain committed to canvassing for change as the status quo is far from ideal. The ASX can and should do better with their rules, how they are applied and the instances in which it uses its discretion.
Simon Mawhinney is the Managing Director and Chief Investment Officer at Allan Gray Australia. He holds a Bachelor of Business Science (First Class Honours) with majors in Finance and Business Strategy and a Postgraduate Diploma in Accounting (University of Cape Town). Simon qualified as a Chartered Accountant in 1998 and is a CFA Charterholder.
Share
Equity Trustees Limited ABN 46 004 031 298, AFSL No. 240975 is the issuer of units in the Allan Gray Australia Balanced Fund ARSN 615 145 974, Allan Gray Australia Equity Fund ARSN 117 746 666 and Allan Gray Australia Stable Fund, ARSN 149 681 774 (Allan Gray Funds) and units in the Orbis Global Equity Fund (Australia registered) ARSN 147 222 535, Orbis Global Equity LE Fund (Australia registered) ARSN 613 753 030 and Orbis Global Balanced Fund (Australia registered) ARSN 615 545 170 (Orbis Funds). Allan Gray Australia Pty Limited ABN 48 112 316 168, AFSL No. 298487 is the investment manager of the Allan Gray Funds.
Past performance is not a reliable indicator of future performance. There are risks involved with investing and the value of your investments may fall as well as rise. This represents Allan Gray Australia Pty Limited and Orbis Investment Advisory Pty Limited’s view at a point in time and may provide reasoning or rationale on why we bought or sold a particular security for the Allan Gray or Orbis Funds or our clients. We may take the opposite view/position from that stated, as our view may change. If this article is authored by Orbis, it does not prohibit the Orbis Funds from dealing in the securities before or after this article is published. This article constitutes general advice or information only and not personal financial product, tax, legal, or investment advice. It does not take into account the specific investment objectives, financial situation or individual needs of any particular person and may not be appropriate for you. We have tried to ensure that the information here is accurate in all material respects, but cannot guarantee that it is.
You should consider the relevant funds’ Product Disclosure Statement (PDS) or Information Memorandum (IM), as applicable, before acquiring, holding or disposing units in the Allan Gray or Orbis Funds. The PDS or IM can be obtained from
www.orbis.com.au and www.allangray.com.au.
Target Market Determinations (TMDs) for the Allan Gray products can be found at
allangray.com.au/PDS-TMD-documents,
while TMDs for the Orbis Funds can be found at www.orbis.com.au on the 'Forms' page under 'How to Invest'. Each TMD sets out who an investment in the relevant Allan Gray or Orbis Funds might be appropriate for and the circumstances that trigger a review of the TMD.
Managed investment schemes are generally medium to long-term investments. They are traded at prevailing prices and the value of units may go down as well as up. There are risks with investing the Fund and there is no guarantee of repayment of capital or return on your investment. Subject to relevant disclosure documents, managed investments can engage in borrowing and securities lending. A schedule of fees and charges is available in the PDS.