Shareholders push ahead with Mincom's extraordinary meeting

Mincom has failed to derail an extraordinary general meeting which could sour its efforts to attract about $50 million from white knight investors. However, a coalition of restive shareholders petitioning for the EGM, appears willing to cool down the war of words over the giant software developer's performance. Meeting last week with the group of disgruntled Class A shareholders, Mincom chairman David Graham could not persuade them to drop their demand for the EGM.

He asked them to remain patient but the group's co-ordinator Will Gout, said "We have heard it all before". At the same time, the dissident shareholders were receptive to requests to cool the rhetoric surrounding the situation, Gout said. Mincom now plans to hold the EGM as quickly as possible - probably early this month - to remove it as a focus of adverse media attention well before the scheduled October climax to its capital raising.

Any worsening of Mincom's problems would be a serious setback for Australia's export-challenged software industry. Exports account for 60 per cent of Mincom's annual $170 million revenues, arguably making it the country's bestperforming software exporter.

To put that in context, Australia now suffers a $3 billion annual imbalance between software imports and exports and the gap is widening, according to the Boston Consulting Group. Graham said he will step down as chairman on completion of the fund-raising effort which is being managed by Deutsche Bank. His departure will mark the second major change at Mincom following the resignation last month of CEO Frank Berger.

Notably absent from last week's meeting was Melbourne businessman Wayne Bos who holds options over 20 per cent of Mincom and has been agitating for a board seat since April. Bos wants to orchestrate changes which he claims will increase shareholder value in a company heading for its fourth unprofitable year in a row. He has not spelled out the changes but they will undoubtedly involve rationalisation of senior management whose total salaries have risen 140 per cent since 1998 while Mincom's business has stagnated in a tight market.

Graham claims shareholder support of more than 60 per cent; however, the defection of just one large employee-shareholder would swing the numbers in Bos' favour. In hindsight, Mincom's board probably erred by historically putting too much emphasis on revenue growth rather than profits, Graham said.

Mincom's 2000-2001 financial year will not repeat last year's $14 million loss but neither is it expected to turn a profit until next year, he said.

"While there have been shock-horror losses, I don't think there has been any diminution in Mincom's value.

"We find ourselves in a fix because of the impatience of the Class A shareholders. I am sure they have very good reasons for their patience to be worn out. Despite its profit woes, Mincom's valuation "has probably improved - or at least not gone backwards". That view is about to be tested by Deutsche Bank's fund-raising efforts. Mincom needs to find about $10 million to increase liquidity for its shareholders and $40 million to fund business expansion.

Deutsche Bank has distributed confidential information about Mincom to an unspecified number of potential investors and follow-up presentations have been made by acting CEO Alan McElrea to interested parties both in the US andAustralia, Graham said. Given the value of Mincom's products and customers, a failed capital raising was "inconceivable", he argued.

If his assessment is wrong, "Mincom is not going to disappear as a company but would have to do things differently". Logically, such changes could include deep changes in management, trimming Mincom's 1000-plus -staff by 15 per centand a sell-off of some divisions.

On the subject of Wayne Bos, "our attitude is we don't have an attitude to him", Graham said. "We think the idea of him coming on the board now would very severely annoy some of the people coming in with some dollars because at this stage he hasn't put a proposition up [spelling out where he would take the company]."

Mincom has asked Deutsche Bank to contact Bos' Tomorrow Ltd as a possible recipient of the information memorandum it is providing to possible investors, Graham said.

"What has transpired between them is a confidential matter. I can't say what happened or didn't happen."

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