EGM Notice and EM-biased and misleading Apologies for a very...

EGM Notice and EM-biased and misleading

Apologies for a very long post but the NOM/ EM is infuriating.

The Explanatory Memorandum (EM) accompanying PGH’s Notice of Meeting (NOM) for the EGM is biased and in some respects misleading. It is addressed to PGH shareholders, but its selective arguments read more like a plea from the Board to ASX to allow the delisting. It does NOT read like an open and balanced discussion between the Board and shareholders.

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P4 states “The purpose of this [EM] is to provide shareholders with all information known to the Company which is material to a decision on how to vote [at the EGM]”. Given the contents of the EM, this purpose has not been satisfied; what “information” is provided is not balanced or independently justified, is often subjective and is incomplete. For example it does not mention that (before it was issued) a shareholder had already objected to the Takeovers Panel about the proposed delisting (see below). That is highly relevant to the purpose of the meeting. (Since then a second formal Application has been made to the Takeovers Panel.)

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Minority shareholders should vote against this resolution- it is an easy decision because delisting is almost entirely to their detriment. The claimed cost savings of delisting- which in any case look exaggerated- are a very poor trade-off for what shareholders are being asked to surrender. Part 4 of the EM says that “the Board consider that it is in the best interests of the Company and its shareholders for it to be [delisted]’’ As I said in my letter of objections to ASX, “this is absurd and offensive. Even if it was in the interests of the Company (which I dispute) it is certainly not in the interest of “the shareholders”. Delisting will benefit only one shareholder, namely Mr Geminder, through Bennamon and its associates. It will be severely detrimental to the interests of all other shareholders”. The so-called “independent directors” should be ashamed of supporting the oppressive campaign by Mr Geminder to obtain full ownership of PGH very cheaply, despite strong shareholder resistance.

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My observations It was issued on 12 May but does not mention the Application to the Takeovers Panel made on 9 May by a shareholder, in which

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“Theapplicant seeks interim orders to stay the delisting process until the Panelmakes a determination on the application. The applicant seeks final ordersincluding that: • the major shareholder be restrained from voting on thedelisting resolution • PGH provides certain disclosures in the notice ofmeeting of EGM • the timetable for suspension of trading be extended by atleast 60 days (if the delisting resolution is approved) • an independent thirdparty be appointed to oversee the delisting process and • post-delisting, PGHbe required to offer a facility to allow shareholders to sell their shares toPGH at an independently assessed fair value’.

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…although PGH did note onthe ASX platform on 9 May that the ‘[TOP Application] has been made by a shareholder in connection with the proposed delisting….’

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The NOM and EM do not say who will chair the EGM, although I assume it will be Mr Geminder. It would be better to have an independent chair of the EGM, given his material conflict of interest on the matter (and he intends to vote his 88% on it).

It says “the Chair [of the EGM] will seek to address as many of the more frequently raised questions as possible”. Anyone who listened to the AGM will remember how dismissive Mr Geminder was of shareholder questions at that meeting: I doubt that the EGM will be any different. It will be only a virtual meeting, so shareholders cannot attend in person to object and “read the room”.

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2.2.1 1t is irrelevant that the top 18 PGH holders own 97.71%: there are still 1,700 shareholders and at least 1,000 of them hold “marketable parcels”, which is an important criterion for ASX to maintain listing.

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2.2.2 It is silly to compare the volume of 24/25 trades with August 2023: Mr Geminder himself is responsible for absorbing most of the shares and leaving little tradeable volume.

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2.2.3 This section on putative cost savings is misleading and/or exaggerated. NB it compares $1.57m pre-tax saving (which it doesn’t break down per item listed, and is not verified by an independent person) with PGH’s $44.9m underlying profit after tax for FY 24. A proper comparison would be for the claimed saving to be stated as $1.1m after tax. I doubt that that misleading comparison was accidental.

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It’s true that there should be audit fee savings from delisting, as the Rem report would no longer need to be provided in the Annual Report, and therefore wouldn’t need to be audited. If PGH is delisted an Operating and Financial Review is no longer mandatory. It will be interesting to see if the Board decides to exclude or downgrade the OFR, if PGH is delisted. The 2024 OFR was good, and helped to present PGH as a prestige company. Its removal would reduce audit work, although even when listed the OFR only needs to be reviewed for consistency, not audited. All the other substance of the Annual Report will still be required and must be audited. Audit fees in FY24 were $1.57m (by coincidence). I doubt that PGH’s change from a listed to unlisted disclosing entity would save more than $250K pa in audit fees.

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D&O Insurance cost would be likely to fall from FY24, irrespective of the listing status. PGH should already have negotiated a lower D&O premium now that the Board is controlled by Mr Geminder and his interests; it’s likely that the D&O insurer would consider that the risk exposure for PGH directors and senior management would be lower than when RG’s ownership was at 50%. We are not told what D&O figure the Board has used as a comparative, but I guess that (for this purpose) they used the higher premium level pre takeover, without allowing for the change in control.

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Why would there be savings for the share registry from delisting: PGH will still need to maintain a share register?

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AGM and yearly/half yearly results announcements: cost savings will be nil or tiny. All these are still required if PGH is unlisted.

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ASX listing fees are $72,895 pa- that would stop on delisting. The ASIC fees are tiny ($1492 pa) and should not change.

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PGH says there will be savings from reduced headcount in company secretarial, finance and management roles. How many people are they thinking of removing? It is hard to imagine that the extra obligations created by being listed (as compared with being an “unlisted disclosing entity”) amount to even 1 FTE person; PGH acknowledged in this section that the material reporting and continuous disclosure obligations will still apply. In any case PGH’s commitment to Investor Relations is woeful: in the last 18 months there have only been a handful of (voluntary) announcements i.e. that did not relate to the takeover or statutory/ regulatory requirements. PGH chooses not to report more than is required by law: that won’t change and nor will its very low cost.

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2.4.1.2 This is a gross exaggeration. If PGH is downgraded to an unlisted disclosing entity, most of the regulatory and statutory requirements will still apply. If the Board feels that it is ‘wasting’ a lot of time on these matters and is “distracted” then it is incompetent- especially as Mr Geminder is Executive Chairman and three of the other directors were appointed by him and work for PGH or Kin.

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2.4.1.3 This states, laughably, that there is pressure to focus on short-term results (from being listed) which comes from ‘investors, the investment community and media attention’. That is a generic observation which may be true for many leading groups, although is usually successfully resisted by Boards; however, given PGH’s disdain for communication with investors (and media) in recent years, this” pressure” is at best a gross exaggeration. In any case, PGH has invested substantial capex in recent years which is hardly reflective of short-termism.

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2.4.1.4 This is a silly argument. There are thousands of very competent directors at Australian listed companies, including very large groups, with high profile roles. Is PGH suggesting that many of those directors are substandard and better potential directors have been deterred? Conversely, is PGH promising that it might be able to appoint better directors if it was unlisted? That would be welcome!

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2.4.1.5 This is neither an advantage nor disadvantage- nothing changes

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2.4.2.1 This links to section 2.5, which says ‘[if PGH delists] shareholders can sell on market until 14 July, which is a month after the EFGM, and gives shareholders an adequateopportunity to exit their investment if they wish to do so’. That is patently false. It is not “adequate” and this argument utterly contradicts what the Board said in 2.2.2. Nearly 41m shares are owned by PGH minority holders. Only a small number of shareholders, with smaller holdings, would be able to sell in the limited time to 14 July. It is highly unlikely that even 10m shares could be traded before 14 July, especially if shareholders wait to see the result of the EGM before selling. Even that volume would be likely to depress the share price severely, which would be a loss for the sellers but a gain for the buyers, including perhaps Mr Geminder. Here, and in section 2.5, does PGH intend to facilitate a private market for shareholders to trade their shares? Or to commission occasional independent valuations?

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2.4.2.2 That’s good to know, but PGH could raise unlisted equity or debt.

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2.4.2.3 Voluntary (i.e. non statutory) disclosures by PGH in the last 18 months have been almost nil- so nothing will change!

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In conclusion, shareholders should of course read the NOM and EM thoroughly and carefully, and make up their own minds. I would usually say “not advice” in a HotCopper post. Here it is obvious what shareholders should do- vote against the resolution. Do not vote “abstain” or give an open vote to a proxy holder- whether it’s the chairman or another person. Say clearly what vote you want- preferably against.

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