rivkin eyes snx cash

From today's AFR.

SecureNet's cash catches Rene's eye
Jan 24
David Crowe

Nothing attracts a corporate raider like a vulnerable company sitting on cash. So it is with SecureNet, the security developer with $70million on its books and a new challenger on the horizon.

After speculating for months, Rene Rivkin has formally launched his bid to get SecureNet to return $68million to shareholders by paying out 90¢ a share.

SecureNet is yet to name a date for an extraordinary meeting but is expected to hold the meeting within two months.

Those who followed the speculation over Mr Rivkin's plans will be happy - the shares have risen from 80¢ to more than $1 since plans surfaced in November.

Still, SecureNet's founder and managing director, Geoff Ross, said the company would need all its cash to fund its growth, either by investing in more research or by acquiring other companies with security technologies or security services operations.

Mr Rivkin's argument is simple: SecureNet shares have traded well below their net cash backing, highlighting the inadequacies of the company's board.

"My theory is that only a masochist or a moron would reject what I'm suggesting," he said.

His campaign to win votes starts in the week ahead, when he will write to all shareholders. He said he had about 6.7 per cent of the company behind his plan already.

Some shareholders will welcome Mr Rivkin's proposal since SecureNet's revenue fell 40 per cent to $19.9 million and it posted a $50.7million net loss in the year to June. Mr Ross is promising to double revenue to $40million and post break-even EBITDA in the current year.

SecureNet is particularly vulnerable because its top 20 shareholders hold only 41 per cent of the company.


Its chairman, former Capita Financial Group chief executive and State Bank of NSW chairman David Greatorex, controls at least 6.6 per cent of the company. Mr Ross, who founded SecureNet in 1986, increased his stake to 4.3 per cent in December by buying 580,678 shares at about 87¢.

Other shareholders will be the key to the vote. PCCW of Hong Kong holds 5.4 per cent as a result of its sales partnership with SecureNet in Asia. ANZ Bank holds about 3.4 per cent.

Mr Ross conceded the company's big shareholders might reconsider their opposition to Mr Rivkin's manoeuvre if they could not put the existing cash to good use. The catch is that it could take the company another year to decide what to do.

"We can deploy some or all of the capital to grow our business," Mr Ross said. "If we can't gainfully do that we would reconsider our position. Over the next 12 months all of that will clarify itself."