Peter Smedley's Chairmanship of Arrium - DISGRACE

I have put together a time line of this Napoleonic and now discredited Chairman's 15 year tenure on the board of OneSteel (Arrium)

1) A long executive career at Shell where he earned a "formidable reputation";

2) Appointed CEO and Managing Director of Colonial in 1992; went on a string of acquisitions and then sold it in 2000 for $8.50 billion to Commonwealth Bank in a deal analysts considered was over the top - indeed, it later proved to have been $1 Billion more than it was worth - the CEO at the time who bought it - David Murray later admitted that in hindsight he wouldn't have. Smedley left with A$20 million in shares and a lifetime pension of $1 million per year (which is any future Court Case is successful from Arrium shareholders he may be giving up). Amazing, if a private company overpays for an asset too much, you go broke, yet CEO's still keep their jobs or they make up for it by increasing fees and charges on customers or going back to shareholders and raising more money in a rights issue - oh, and they still keep their jobs.  Rio Tinto's buy of Alcan for which they overpaid for it by A$8 billion more than it was worth another case in point;

2) Smedley Chairman of OneSteel from inception when spun off from BHP in 2000 with high debt load. Dr Bob Every a medtallurgist was CEO.

3) Smedley appointed CEO of Mayne Nicklas in 2000- a transport and logistics company. He brought over his Mangement Mate from Shell and Colonial Mr Stewart James as his second in command. Smedley diversified into private hospitals and healthcare which was unrelated to its previous core business, went on a ruthless cost cutting drive an centralised all decision making regarding the private hospital division.  Doctors, angry at the management style of the jerk, referred their patients to hospitals NOT owned by Smedley's Mayne. Revenues plummeted and the Board then fired Smedley and wrote down the value of the hospitals by $750 million - only his mate, Stewart James was kept in his jon.

3) Dr Bob Every departed from OneSteel in 2005 having paid the debt load well down on its high level it was when first spun out of BHP. He later described his relationship with the Chairman Peter Smedley as TENSE; they did not get on.

4) Smedley appoints Geoff Plummer as the new CEO of One Steel - Plummer, a transport and logistics guy was not an engineer unlike Every. He must have also had a hand in the appointment of a very young and inexperienced lawyer Ms Naomi James (aged only 27 at the time) as Chief Legal Officer ahead of a more experienced lawyer (say aged 40) who would have had 10 years major face to face corporate experience (say from BHP. Rio Tinto, Coal and Allied, Toll Holdings etc).

5) Mergers with Smorgon Steel for US$1.20 Billion.

5) 2008/2009 at the height of the GFC, raised $850-$900 million from shareholders in a rights issue;

5) 2010  - buys 2 companies, Molcyop and Alta-Steel - later renamed just Molycop for A$932 million (the value of the A$ was then US$0.98 cents;

6) Sold off Piping division for A$100 million;

6) Nov. 2011 - buy WPG Resources and its Southern Iron Ore Mine for $320 million - another $280 million spent building the mine and getting it into production. When merges the 2 iron ore mines together, the break-even price delivered to the port in China was a very high US$73 a tonne - more than twice as high as BHP or Rio Tinto - indeed, their break-even prices is now down to only US$12 to $13 a tonne. Logic for the buy of this from the board was that Southern Iron had a very high ore grade and that they believed the iron ore price would not drop below US$75 for any sustained period of time - in other words they WRONGLY assumed it would have a floor under it of US$75 a tonne.

7) 2012 Geoff Plummer departs as CEO but hangs around for 4 to 6 months after as a "consultant" to the new CEO, Mr Andrew Roberts - a marketing guy;

8) 2012 (second half) - Iron Ore prices collapse from US$145 to only $85 in only 6  months - dangerously close to the break even price of the 2 iron ore mines combined.  Posco and Noble, come knocking on the door and offer 77 cents per share takeover price which was later revised up to 88 cents a share; Smeldey knocks it back;

9) January 2014 - Iron Ore price gets back up to US$115 a tonne and the value of the Aussie drops back to $0.86; the cents; the share price of Arrium increases to $1.70 - analysts still warn Smedley and his board that the company has too much debt - Smedley ignore them and begins selling off some non-core assets - Wire Ropes Business in Newcastle and Port of Newcastle raising $124 million, Ms Naomi James was by now a Head Strategy and must have been a part of this.

10) September/October 2014 - announces a shock $754 capital raising in a fully underwritten rights issue with UBS Warburg - Freehills were their legal adviser. No mention was made in the rights issue that if the price of iron ore continues to drop what the MASSIVE initial and ongoing closure costs would be of the higher cost Southern Iron Ore Mine - despite the break-even price being dangerously close to the break-even level. And the board would have not what this would be as they would have signed the contracts for them - $ and expiry date.

11) Late January/February 2015 (only 3 month after the capital raising) - Iron ore Price drop below the break-even price and Southern Iron is closed

12) 2015 - July - Smedley finally departs the sinking ship after 14 years of Chairman of the board - with a share price less than 40 cents a share - 50% less than what it was when it was spun out of BHP back in 2000.  Oh, and he got 2 huge sums of shareholders money along the way - $850 million and then later $754 million - that's over $1.60 Billion in total.

As proof of how grossly out of touch and arrogant this pathetic Chairman was he had the hyde to tell financial journalists "Strategy executed, job well done". Really Mr Smedley - you are a DISGRACE.  The only saving grace of the end of this corporate pacman's career is that aged 70, he was too old to give a shit - it was to be his last corporate gig - if he ever applied for another just ask him the blunt question - how do you perform with other people's money at Mayne Nicklas or Arrium - BUGGER OFF - you would not let him near $1 million of your money let alone $1.60 billion.

Apart from buying other people's businesses and lining the pockets of white collar trash with huge fees along the way (accounting, legal and in the case of Arrium, Korda Mentha), this jerk has never invented or designed an original idea or product in this life yet as Chairman of Arrium, we were paying him double what a Professor of Engineering gets paid in Australia to just go a debt fuelled buyer of other people's assets. Not like the founders of a fashion label or Google or Yahoo is he?

The final nail in the coffin of this very controversial businessman's career and management style - and he may yet spend many of his last years on earth in the courtroom by the time KM does all of its investigations. And lawyers on behalf of shareholders upon whom he was paid good money to represent will have their day in court with him.

Still he will spent the cold nights down there in Toorak in an $8 million home, no doubt in the name of his wife - as will his old mate Plummer who lives up near Sydney's expensive Palm Beach in a similar rich man's pad - all bought with real money from other people's pockets - shareholders. Smokes and Mirrors.