Gina Rinehart has sold 86.5 million shares in Fairfax Media, lowering her ownership stake to just below 15%, as her standoff with the Fairfax board continues.
Rinehart, who remains the troubled media giant's largest shareholder, was last week refused board representation when talks between the mining magnate and Fairfax broke down.
According to reports last month, the Fairfax board was worried about the current directors' insurance terms because coverage doesn't apply if a director who holds more than 15% of the company sues another company director. The board wanted a waiver of these terms from Rinehart or an agreement she would not launch legal action before she is allowed seats.
But by selling down her share to below 15%, Rinehart has effectively side-stepped this problem.
“The sale was completed to resolve an issue that arose concerning the directors and officers insurance policy, in the situation of a director having a greater than 15% shareholding in Fairfax,” said Hancock Prospecting chief development officer John Klepec in a statement this afternoon.
“This was one of the key issues recently raised by the chairman of Fairfax [Roger Corbett] and needed to be resolved by either the chairman authorising endeavours to raise the 15% limit, which has been able to be reasonably achieved by other companies, or, as also discussed with the chairman, by sale of shares so that the largest shareholder had less than 15%.”
Reportedly the board's demands are a result of concerns around Rinehart's recent courtroom battle with three of her four adult children, who want access to their 23.4% stake in the multi-billion dollar Hancock Prospecting.
Klepec stated the sale went ahead in a single transaction “to minimise any market impact” as Fairfax has not altered its insurance terms for directors.
“We continue to monitor the performance of our investment in Fairfax noting that the shares are trading at record or near record lows, which is an independent assessment of the chairman’s performance,” Kelpec said.
“We also deny unsubstantiated rumours spread by others, that we are about to 'make an offer' for the Company, when we have previously stated we are not seeking control of Fairfax, just the appointment of two directors plus an independent out of up to 12 directors on the board.”
Klepec also made reference to the open letter Rinehart sent to Fairfax chairman Roger Corbett last week, demanding milestones be set for his performance, including that he raise the shareprice to 87 cents a share by the next AGM.
“We again urge the chairman to tell concerned shareholders that he will accept proposed milestones regarding his performance in the interests of Fairfax and its shareholders, or propose other reasonable KPI’s to meet for the continuance of his chairmanship past the AGM in November 2012,” Klepec said.
Rinehart had previously threatened to sell the entireity of her stake in Fairfax Media if not granted board seats with Rinehart's company Hancock Prospecting telling the ABC's Four Corners on her behalf she “is unable to assist Fairfax at this time”. The company “had hoped” Rinehart would be seen as “a necessary 'white knight' with a mutual interest in a sustainable Fairfax”.
Rinehart is reportedly seeking deputy chairmanship and three seats on the Fairfax board, one of which is likely to go to her fellow Ten Network Holdings director, Hungry Jack's founder Jack Cowin.
The mining magnate is allegedly also demanding influence over editorial content in Fairfax's mastheads, which include The Sydney Morning Herald, The Australian Financial Review and The Age. Rinehart has also reportedly stated an interest in playing a part in the hiring and firing of senior editorial staff and has refused to sign Fairfax's Charter of Editorial Independence introduced by former chairman Zelman Cowen two decades ago.
Federal Communications Minister Stephen Conroy, Treasurer Wayne Swan, industry bodies including the Media, Entertainment and Arts Alliance, and journalists have called for Rinehart to sign the Charter to ensure future journalistic independence.
But speaking to Fairfax Radio and ABC Radio last week, Fairfax chief executive Greg Hywood said Rinehart is “a good, positive investor backing the company” and the Charter has been misunderstood.
“There's misnomer about the charter,” Hywood told Fairfax Radio. “No board member has never been required to sign it. Every board member can talk about editorial issues inside board meetings, but that doesn't translate to telling journalists what they can and can't write.”
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