Comments from Forager Report

The last remaining problem child, Thorn Group (TGA), remains in the naughty corner. We have invested an inordinate amount of time trying to convince directors of this company to act in the best interests of its shareholders. Initially we were fighting directors who had no ownership of the business and were incapable of making unpleasant but important strategic decisions.

Now shareholders have a board that is dominated by nominees of its largest shareholder. They have made some of those unpleasant decisions, and as a result the company’s cash balance is growing rapidly. But we are fighting with them too.

Our dispute culminated in an application to the Takeovers Panel to stop the company applying its dividend reinvestment plan (DRP) to a large fully franked dividend paid in October. It’s our opinion that the DRP was specifically designed to give its largest shareholder, the Duncan Saville controlled Somers and other related parties, control without offering the rest of us a takeover bid.

The Takeovers Panel sided with Forager, forced the company to cancel most of the shares issued to Somers under the DRP and ordered Thorn to pay some of the legal costs incurred by Forager. It was a big win, the first ruling we know of in relation to a DRP, but ultimately not enough.

Thorn held an extraordinary general meeting on the 4th of January to consider resolutions to remove the Somers nominated directors and appoint two small Thorn shareholders to the board. Despite 80% of the non-Somers shareholders voting for the incumbents’ removal, the vote fell short by a slim margin.

We have spoken with other shareholders and are still considering further options, but with Australia’s takeovers laws allowing a significant shareholder to continue increasing their holding by 3% every 6 months, the likelihood of minorities having a say in Thorn’s future are diminishing by the day. We will continue to push for dramatically improved governance. The cash will keep rolling in. But whether and when it rolls back to shareholders is as uncertain as ever.