Jibes cast a shadow over Telstra head

Allan Freeth

It's been a sweet and sour week for TelstraClear chief executive-designate Allan Freeth.

A proud day on Tuesday, when his appointment was announced, and a "wonderful" week in Auckland were tainted by market regurgitations of his disappointing last months at Wrightson, and the final bruising sendoff in July by hostile takeover engineer Craig Norgate.

Freeth, 44, was hurt, says a friend, by the market's surprise over his appointment and by analysts, hiding behind anonymity, making suggestions that he had achieved little as chief executive and managing director of Wrightson in five years.

But the sniping also made him more open to persuasion to talk about what went wrong at Wrightson in his past two years at the helm, while the agricultural economy and rival companies prospered.

Wrightson's latter-day poor performance would prove a big stick for Norgate to flog Freeth and his fellow board-members in the former Fonterra chief's stroppy campaign for control last year.

Freeth, a PhD-qualified geneticist and former banker, is not ducking the charge that Wrightson had lost its way, after he and his team rescued it from near-collapse in the late 1990s.

When he should have been 100 per cent focused on the daily running of Wrightson in 2002 and 2003, he and the board were distracted by two uninvited takeover moves. One was from overseas, the other from Fonterra's retail arm, RD1.

About the same time, Wrightson was also trying to initiate the industry rationalisation that Norgate is now getting the credit for. According to a source, Wrightson made serious attempts to acquire RD1 (before Fonterra's counter takeover move), Allied Farmers and Williams & Kettle, which Wrightson - under Norgate - has just bagged.

Freeth won't discuss the events. He would only say that in the latter half of his five years lots of time went on dealing with takeover interest and a series of attempts at industry rationalisation.

It is understood the unwanted overseas interest was not revealed to the market because it did not get to the stage of a bid, and Fonterra's tilt (under Norgate) for 100 per cent of Wrightson fell over because of internal staff ructions. RD1 ended up with just 19.9 per cent of Wrightson.

According to a Wrightson source, the merger talks with W&K, initiated by major shareholders Sir Selwyn Cushing and his son, crashed in November 2003 when the W&K board rejected a deal.

The irony is that W&K in the end preferred Wrightson as a merger partner over an alliance with a Fonterra/Pyne Gould Guinness partnership, which tried last year to buy a blocking stake in W&K, only to be spectacularly beaten by Norgate's Wrightson. According to one analyst, it came down to style.

But Freeth would be the first to admit his move on W&K would have been viewed as hostile.

Back to November 2003. Instead of buying a blocking stake in W&K on the market to start overdue sector rationalisation, Wrightson dithered. (It had zero debt and could afford to have been bullish).

"Do I feel like I failed in that area? Yes I do. I didn't have the balls or the courage to get aggressive and move hard," Freeth says.

But did he have the support? "No."

Freeth won't elaborate but, looking at the time-frame, it's hard to avoid the conclusion that then-Wrightson chairman John Palmer's appointment as chairman of the nose-diving Air New Zealand in late 2001 must have been a big distraction. The Wrightson board also had a low appetite for risk.

Freeth agrees that some of his strategies to change attitudes and business approaches in the highly traditional sector, notably the sophisticated Wrightson Solutions package of initiatives for farmers, did not get traction or the hoped-for earnings.

There was also that bold but disastrous 15 per cent investment in bio-tech company Genesis. Wrightson paid $5.1 million for the stake and recently sold it for $1.8 million.

An analyst's suggestion that Freeth's big-business style senior management structures were inappropriate for Wrightson is slightly unfair, he says.

"I inherited a Fletcher Challenge company. The issue facing us pretty critically at the time of the [Norgate] takeover was we either reverted to a stock-and-station model, in which case all that would have been stripped out.

"I was thinking seriously whether to take that strategy to the board - in which case it would have become a very different company - or we continued along the path to actually change the nature of the company and the business it was in."

Riding the wild earnings fluctuations of the agricultural cycle is "incredibly hard" for a public company, he says.

"I think the critical issue around the company was that it probably had an inappropriate ownership structure for the nature of the industry.

"It probably never should have been a public company. You never got a breather [to plan and strategise] because the market punished you for earnings decline.

"Wrightson's now got an investor that will probably take the ups and downs."

Freeth says he was bruised rather than bitter after Norgate showed him the door last July.

In ranging himself alongside directors in rejecting Norgate's initial offer as too low, Freeth exposed himself to attack by Norgate and jeopardised his job.

"I did everything by the book, to my own detriment. I was stunned that anyone would think my behaviour would be any different to the board's - I was a director of the company, for God's sake.

"I had all the [fiduciary] liabilities and responsibilities of a director and whether or not I survived was secondary.

"My duty was to ensure maximum value for shareholders."

A former colleague says Freeth is "incredibly ethical".

Whatever the snipers say, Freeth points out that when he took over Wrightson its share price was 32c. When he left it was $1.65.

"Despite what those analysts say, I like being a chief executive and I'm good at it."

He accepted the TelstraClear job because of its strategic and competitive challenge and inherent pace and pressure. He has a "high intolerance" for boredom and says it is irrelevant that he does not come from the telco industry.

(He has been on the TelstraClear advisory board for more than a year as Wrightson was a major customer.)

"I've had a tough data-based training. Sure, it's around physics and electrons and radiowaves but it's still a scientific base that leads to technology. But a business is a business, it's about people, revenues, expenses, strategy, competitive advantage and alliances."

After seven months' time-out, Freeth is raring to go.

"It'll be fun - and hard."

Allan Freeth

* Age: 44
* Married with three children
* Based: Wellington
* Qualifications: BSc, PhD, MBA

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