VW Veneer reveals BMW heart

While waiting to get my fish and chips order today for lunch, while out planting some trees for a client I started reading an article by Deborah Hill Cone in the Friday September 3rd edition of the Business Herald lift-out (5 year old "Womans Days" with Rach & Rod on the cover don't do it for me anymore) and what was she writing about?

Yep the man without a plan, the man everyone loves to hate, formally the richest man in Timaru (where is that again?) Allan Hubbard.

I wasn't going to go back there but after my order of 1 chips and a scoop arrived (that is what they call it in the Hawkesbay where I lived my formative years) I just had to keep reading.

Debs made some really good points.

We already know the financial shenanigans and shell games Mr Hubbard and his good mates were up to with other peoples moola but Debs, (I can call her that because I live in Auckland and we are a close knit family up here too) as she does, came at things with quite a unique angle.

She was looking at the intensely close, almost incestuous nature of the order of things in the part of the country that Hubbard and his mates come from.

This she contends, dates back from early settlers who arrived in boats from old mother England and continued their class distinctions in their new land that shows today in the back slapping, secret handshaking, old schoolboy network that supported Mr Hubbard and that supports him to this day. This New Zealand breed of wannabe aristocrats didn't like to flaunt their wealth Though.

She described them well as the airtex wearing, holey jumpered men who looked like paupers but were actually well to do and their lady companions who "wore their collars upturned".

It was kinda like an awe shucks look at me mentality I'm so down to earth, I must be I'm dressed like a bum.

Witness the epitome of this in Mr Hubbard. New Zealands answer to Warren Buffett, who is well known for his frugality and homespun hokiness - he would call it old fashioned. Mr Hubbard is top to toe well-worn Hallensteins circa 1950 and even drives a beat up VW which doesn't look like it has seen much back seat action (if at all) since it was bought by him in the 1960s.

Of course at at one stage though the NBR valued this man a half a billion.

That is of course when this whole charade unravels into reality.

These strange people in this clique of people down there in the Canterbury area (If you are reading this and actually flaunt your wealth like most Aucklanders then I am probably not talking about you) stick together like a Parnell Girl to her Takapuna Grammar old boy 10 years her senior and the motivation for support of Allan Hubbard seems connected to the tribe mentality of looking after the individuals in the pack, should the whole tribes reputation suffer a mortal moral, legal or in this case financial gaping wound.

If I maybe serious for one moment, this appears to be the reason why the main pack behind support for Allan Hubbard, the old boys network of Canterbury ( I am a bit jealous because Onehunga High School where I hail from doesn't have this sort of network) is rallying the ignorant, angry, lonely hoi poloi around them in the hope that the herd will stop the all important old boys network from a fatal blow.

This sort of protection of the big fish is great if you can get it and the network in and around Christchurch and Timaru are doing a sterling job of circling the wagons in the face of the reality of even bigger fish from the Serious Fraud Office and forensic auditors crawling so far up Mr Hubbard's backside not even a Christchurch Boys High School old boy could get a finger up there let alone anything else.

I had a different opinion of the support for Mr Hubbard, I thought it was sheer ignorance and stupidity (well?) but my good mate Debs up here in Auckland has convinced me it is mostly about protectionism; of a group that has always seen itself as the ones who make the decisions and wield the power over ordinary folk like you and me.

Amazing what you can find in yesterdays fish and chip paper huh?


Related Share Investor Reading

Download Grant Thornton Report 1
Download Grant Thornton Report 2

VIDEO: Jenni McManus Explains Allan Hubbard Collapse
Allan Hubbard Statement on SCF Receivership
VIDEO: Sandy Maier - full news conference on SCF R...s
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Thornton Report 2: Allan Hubbard Guilty as Charged
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Mondrian Investment Partners take stake in Fisher & Paykel Healthcare

Mondrian Investment Partners yesterday become a substantial shareholder in Fisher & Paykel Healthcare Ltd [FPH.NZX].

The fund manager disclosed they took a 5.01 percent stake after purchasing 483,566 shares on September 1.

This is the first shareholding the private investment company has taken in FPH and they give the following reasons for their investment choices:

"We invest in stocks where rigorous discounted cash flow analysis isolates value in terms of the long-term flow of dividends. Dividend yield and future real growth play a central role in our decision making process and over time the dividend component will be a meaningful portion of expected total return."

Hard to know who the seller was but at an educated guess it was probably The Capital Group Companies, Inc who had a 4.92% stake in February 2010 and at that disclosure had sold an almost 1% stake since they disclosed their 5.08% holding in June 2009.

FPH has had a number of stakeholders in the 5% range over the last few years but it seems even though they have stated at time of purchase that their investments are long term they have exited after a few years.

This company is a great long-term investment, one of the best growth propositions on the NZX, so any company taking a substantial holding needs to be patient when investing. They are not going to make big term gains in a few years.

The big gains will be seen 7-10 years.

Disclosure I own FPH shares in the Share Investor Portfolio

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VIDEO: Jenni McManus Explains Allan Hubbard Collapse

Source: NZI Business Sept 2: Fairfax Media briefing with Jenni Mc Mannus

Few people watch NZI business at 6.00am but I occasionally do when I am getting my little girl ready for daycare. This is worth a look if you want to get your brain around Allan Hubbard and his failure at South Canterbury Finance (SCF), Aorangi Securities, Hubbard Funds Management and other divisions of his former business.

Jenni explains the saga over Allan Hubbard and the goings on at his business empire better than anyone else.

Known for her dispassionate focus on facts in terms of business commentary and investigation Jenni zones in on the following key points:

1. Disclosure and transparency of the SCF loan book has always been a problem and a big issue for Jenni.

2. SCF strayed from its core lending under Hubbard. A big reason for his empire collpse.

3. Lachie Mcleod, former CEO of SCF, was lent $15 million to buy shares in SCF with no interest by one of Hubbard's investment vehicles - big questions as to whether this was typical of the lending practices of Hubbard's business interests.

4. Hubbard made decisions without board approval or indeed reference.

5. The statutory management process made clear what was going on all the time. The second Grant Thornton Report is an important document that reveals typical financial processes of the company; hidden loans, inter-party lending, ghost assets. Statutory management had no bearing on the collapse of SCF or any other part of the business.

6. Insufficient due diligence done on finance companies let into the Govt guarantee - well duh.


The probability is, after more poking around in balance sheets and records, that the kinds of loans made by Hubbard and associated companies that will be disclosed will reveal a litany of embarrassing and possibly fraudulent loans and the relevance of the Serious Fraud Office part will become very clear.

You would have to say though that Allan Hubbard isn't alone in his financial skulduggery. Auditors, accountants and advisers to Hubbard and his former business have questions to answer as the SFO case unravels and a further report from Grant Thornton comes latter on this month. What is clear at present is that Mr Hubbard needs to take the biggest responsibility for the failure as he was the head and CEO of SCF.

From this reading, supporters of Mr Hubbard appear to be chasing a dead dog that will lead to further embarrassment of the kind already heaped upon them from the mainstream media that previously supported their stance.

See Chris Lee for an interesting "inside" look.

Related Share Investor Reading

Download Grant Thornton Report 1
Download Grant Thornton Report 2

Allan Hubbard Statement on SCF Receivership
VIDEO: Sandy Maier - full news conference on SCF R...s
Market Alert: South Canterbury Finance to be placed in Receivership
Allan Hubbard: Ignorant Supporters Blissfully Unaware
Thornton Report 2: Allan Hubbard Guilty as Charged
Allan Hubbard: Full TV3 Interview - July 16 2010
Thornton Report: Allan Hubbard's Aorangi Securities
Whatever happened to? Muriel Dunn
Bothered by Simon Botherway
Allied Farmers: Prosecutions should be on the cards
Allied Farmers Fraud passes with little fanfare
Allied Farmers: What's it Worth?
Hanover, Allied Farmers deal more of the same
Jane Diplock Q & A Interview
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Hanover collapse: It was just a matter of time
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Money Managers gives First Step investors the middle finger
Greed is bad: Geneva Finance Folds
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Queenstown Airport: Court Case looks set to Drag

I could well imagine that the argument in the High Court in a judicial review sought by the Queenstown Community Strategic Assets Group (QCSAG) and the Queenstown Airport and the Queenstown and Lakes District Council (QLDC) over Auckland International Airport Ltd [AIA.NZX] purchase of a nearly 25% stake in Queenstown Airport will go something like this.

The QCSAG, who are apparently a group of wealthy influential Queenstowners who have their panties in a twist about the strategic move by AIA, have already argued publicly that the move by the QLDC was "antidemocratic" because insufficient disclosure was made to council and therefore to the public but look set to argue that provisions in the Local Government Act 2002, which requires council-controlled businesses to issue a statement of intent annually to councils, should take precedence over a 1996 clause in Queenstown Airport's constitution which states it can issue new equity without first offering them to its shareholder.

The QLDC and Queenstown Airport are defending their decision to sell to AIA

The QCSAG will also cry foul, like Air New Zealand [AIR.NZX] who will take separate action - probably against AIA rather than the QLDC - that the move by AIA is anti competitive and will take control of the airport away from locals. Furthermore, they will contend that the asset should remain fully locally owned for the benefit of Queenstowners so the potential benefits of full ownership will allow them to reap all the profits.

The issue of big bad Aucklanders who have no experience in business in the area coming down to pick on the little guy who knows how things run will be pushed as well as a contention that AIA will be looking after themselves first before Queenstown Airport.

The QCSAG will pick on AIA's propensity to throw its business might around by raising prices at their Auckland Airport and by implication Queenstown Airport, and their dominant position in the ports market in New Zealand - the word monopoly will be thrown around with gay abandon.

The QCSAG will also argue that AIA paid too little for the airport and that if the port is to be sold it be open to competitive bids.

The QLDC are going to defend their decision and I would imagine reiterate what they have already said in the media that claims by QLDC and AIR lack merit for the following reasons.

The QLDC will argue that the 1996 clause in Queenstown Airport's constitution should take precedence over the 2002 Local Govt Act because Queenstown Airport is an autonomous business separate from the QLDC and any significant public disclosure made to satisfy the QCSAG's stance would be commercially sensitive.

The issue of control of the Airport being taken away from locals would be countered by AIA arguing that they are only buying a less than 25% share with a view to take 35% in 2011 so control will still remain in local hands.

One key point in AIA;s rebuttal will be that they will bring airport expertise, the right avenue for growth in Queenstown Airport and of course the all-important capital required to grow the airport quickly and in the right manner. Pointing back to the QLDC and its ratepayers, AIA will argue that by injecting capital into the business it will allow the QLDC to retire council debt and along with their experience in this sector it will allow Queenstown airport to grow quickly, allow more tourism and be a better long-term return for locals than it would be without AIAs input.

Direct flights to Queenstown will propel growth of that airport, in percentage growth terms, higher than that of AIA and that alone is a good reason to make the buy and increase their stake further to 35% as the purchase agreement allows.

The question of AIA looking after themselves first would be relatively easy to bat away because AIA would contend that their financial stake in Queenstown Airport means that argument is simply silly.

The issue of AIA's monopoly would be argued away because they would contend that since they have no business in the South Island, this isn't a problem and any shareholding in Queenstown Airport would be mutually beneficial to both ports and therefore the monopoly bogey would take a back seat to what AIA will bring to a port connected to a much larger shareholder with a bigger business, providing custom and business expertise.

On the question of the price paid for the port stake being too little AIA would argue that they paid well above market rates for the asst and will provide documentation to prove their point. I have argued that AIA paid too much.

In my opinion though, after arguing my way through some of what might happen in the Christchurch High Court, I think a good judge will find most of what both sides say after the issue of the 1996 Clause VS the 2002 Local Govt Act largely irrelevant because their argument will be primarily based on politics and the politics of business, which can be clearly be argued all the way to the Supreme Court if participants have sufficient funds, so if this is the case the judge's interpretation of these acts will be all important.

Like the vexed case of Woolworths Ltd [WOW.ASX] and Foodstuffs VS the Commerce Commission over the purchase of The Warehouse Group Ltd [WHS.NZX], Queenstown Community Strategic Assets Group VS Queenstown Airport and the Queenstown and Lakes District Council is likely to be another long running saga if they are both willing to take this case all the way to the Supreme Court.

You can look forward to more from me on this as this saga unfolds.

Disc I own AIA shares in the Share Investor Portfolio


Queenstown Airport Buyout @ Share Investor

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AIA @ Share Investor

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Download Queenstown Airport Company Reports



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