tvl tech breakout at 20 cents, page-34

re: packer hunting the onliners as well ;) Door open to predators: Teele
Andrew Trounson
October 04, 2005

VETERAN stockbroker and Australian Foundation Investment Co chairman Bruce Teele has warned that strong cash flows and low debt levels are making Australian companies vulnerable to takeover by rivals that aren't afraid of higher borrowings.

And following a spate of takeovers, he called yesterday on Australian company directors to be more "red-blooded" in opposing takeovers to ensure long-term value isn't given away on the cheap.

Addressing shareholders at the listed investment company's AGM in Melbourne yesterday, Mr Teele criticised the "growth in short-termism in many areas of the market, particularly in takeovers".

He bemoaned the rising influence of hedge funds that can quickly destabilise takeover targets, and criticised independent expert valuations that didn't take fuller account of long-term value.

"Value-based shareholders such as AFIC are being cheated of their holdings and the benefits passed on to the predator," he said.






"Much to our regret, we have lost many companies from our list in this manner."

He noted that takeovers were reducing the diversity of investment opportunities in Australia and that despite strong cash flow, Australian companies remain vulnerable at a time of low interest rates.

"It is possible to observe that some of our companies are so well-positioned that they are making themselves rather vulnerable to takeover from other parties who would prize their cash flow and low levels of debt, and who themselves are comfortable with a higher level of debt."

Mr Teele said the ongoing strength of the share market was "astounding".

"It is being driven by high levels of cash in combination with low interest rates.

"The global and local economies are proving very resilient even in the shadow of terrorism and very high oil prices," he said.

But he warned that Australian stock prices appeared to have got ahead of other global stock markets.

"We are hoping for another good year based on early reports from the companies in which we have invested, but we believe the level of risk is rising and a degree of caution is called for in regard to current market levels."

"In this environment AFIC will continue to look selectively at companies which represent specific long term value," Mr Teele said.

AFIC's annual report showed that chief executive Ross Barker earned $436,000 in 2004-05 which was $20,000 more than in the previous year.

He was also set to receive $233,000 in short-term incentive compensation, which is $33,000 more than for the same time last year.

AFIC's top five investments remain the Commonwealth Bank of Australia ($300 million invested), Westpac ($255.1 million) BHP Billiton ($228.9 million) National Australia Bank ($213.3 million) and Wesfarmers ($196.3 million.

Shares in AFIC eased 4c to $4.06.

With AAP