Solomon Lew's long-game against Myer (ASX: MYR) is reaching a climax as the company edges closer to its 2018 AGM.
This morning Lew responded to Myer's annual report by once again calling for the Myer board to be wiped out and rebooted.
Citing the lack of retail experience of current chairman Garry Hounsell, Lew accused the Myer board of using the company as "a personal piggy bank".
"Myer is our company it belongs to us, the shareholders," says Lew in a public letter.
"Yet the current board has treated it as a personal piggy bank, taking excessive fees while they destroy our investment in Myer. For example, the chairman, Mr Garry Hounsell, having sacked the CEO, Richard Umbers, accepted the role of Myer executive chairman earning the equivalent rate of $1 million per annum. Yet Mr Hounsell had no retail experience and no relevant credentials to take the position, let alone the exorbitant remuneration."
"The board's lack of retail experience has put Myer in its current predicament. And now the failed Myer board has committed to a new deal with its banking syndicate which is all about protecting the interests of the banks."
At the last Myer AGM, Lew was instrumental in giving Myer its "first strike" and is now calling on shareholders to vote similarly considering the company's continued weak performance.
Shareholders will get this opportunity at the next Myer AGM, to be held on November 30, 2018.
A "second strike" would mean the entire board will face a motion to be spilled, which Lew says is necessary to get the company back on track.
Lew also set his sights on the Myer board's decision to grant the banks a charge on the retailer's assets, which Lew says was in order to "protect their own personal positions".
"The banks have never had this right in the past, but now they do thanks to the weak and failed Myer Board," says Lew.
"To add insult to injury, the banks have very significantly increased their fees for the Myer facility and substantially restricted Myer's usage of cash. Banks normally only require these major changes in facilities where they are worried about the future viability of the borrower. Equally, Boards of companies only accept these types of banking facility changes where they do not know what else to do."
Lew's concerns here are undoubtedly going to stir up Myer's shareholders, considering shareholders may now not receive dividends, the company will be paying back the bank instead of reinvesting money into the business, and if Myer falls the bank will be reimbursed first before suppliers and employees.
Myer's annual report
Late Thursday afternoon, Myer released its annual report. Both chairman Gary Hounsell and new CEO and managing director John King apologised for the continuing failures of the company in FY18.
"As a fellow shareholder I share your disappointment with the company's performance during FY2018," says Hounsell.
Hounsell also stressed that the board should remain the same going forward.
"I strongly believe that your interests as shareholders will be well served with John King at the helm and with our experienced executive team, who are supported by a Board that is conflict free and strongly aligned with shareholders."
During the year, Myer's total sales declined by 3.2 per cent to $3,100.6 million, and booked a $486 million full-year loss, but King believes he can put the company back on track.
"I know that Myer holds a special place in Australian retailing and that this position has shifted in recent times," says King.
"I am confident that with the successful execution of our Customer First Plan, we will improve the financial performance of the business and deliver shareholder value."
"I strongly believe that Myer's best days are ahead, and I look forward to a year of delivery, not promises."
The constant reshuffle of Myer's executive team has cost the company over $1.6 million in termination payments.
Former chief executive Richard Umbers received almost $541,000 after he left the company in February.
Former chief financial officer Grant Davenport also received a large sum of farewell money to the tune of $510,000.
Daniel Bracken, who had been the company's chief merchandise officer and deputy CEO before he left in June 2017, received $583,000 in termination payments.
Shares in Myer are up 1.05 per cent to $0.48 per share at 10.52am AEST.
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