Andrew Tinkler became chairman of The Eddie Stobart Group Limited in 2004, when the company he jointly owned with his brother-in-law, William Stobart (and grandson of Eddie), stepped in to rescue the iconic but ailing road haulage business. After a few years of rapid growth, this company merged with one of Mr Tinkler’s companies to form The Stobart Group, and he became chief executive. The intention was “over the medium term, to become the leading multimodal provider of transport and logistics solutions in the UK”.
But growth through acquisition is one thing. Bedding down the acquisitions and managing them for organic growth requires quite different skills. By 2013, it was clear that things weren’t working out. Growth promised after a rights issue the previous year proved less than inspiring, and the share price had fallen by a third over three years, demoting the company from the FTSE 250.
Related party transactions
Questions had also been asked about the company buying or selling assets linked to other companies that directors owned. Always a tricky one this, since independent valuations are inevitably subjective. Some will always question the price paid, or the structure of the deal. The plus side was that Stobart tended to pay in shares. Mr Tinkler’s 7.8 per cent stake and former director Allan Jenkinson’s 5.6 per cent stake can be tracked back to businesses that they sold to, or merged with, Stobart. Investors often find such skin in the game reassuring.
Shareholder action
In 2012, Stobart had acquired Autologic, where its chief executive, Avril Palmer-Baunack, had restructured the business in the teeth of strident opposition. Neil Woodford, then the star fund manager at Invesco Perpetual (who held 36 per cent of Stobart’s shares), pushed for her to chair Stobart. She had skills to complement those of Mr Tinkler, whom Mr Woodford has recently described as an “unconventional, straight talking, honourable man”. More to the point, she clearly had the sort of powerful personality needed to manage him.
The one-headed company
Until then, Stobart had had a dominant chief executive, submissive directors under a non-executive chairman, and compliant shareholders. But when Ms Palmer-Baunack became the executive chairman, her role was far more hands on. Her plan was to make the group more manageable by selling off underperforming assets. A bone of contention this. Mr Tinkler denied that any businesses were underperforming.
Ms Palmer-Baunack lasted all of 71 days. “It was a good life check for me,” she said later. Stobart paid her off with £1.2m – a reward for being set up to fail, driven by the need to honour her contract. And she must have had a torrid time. She said that some fund managers got in touch with her afterwards and “started pushing me and rebuilt my confidence”.
Iain Ferguson, a former chief executive of Tate and Lyle, replaced her in October 2013 as chairman, but in a non-executive capacity. Mr Tinkler’s chief executive role was back as it had been. Six months later, they announced that the Eddie Stobart road haulage business would be sold. This paid off most of the group’s debt and left it with a mixed bag of businesses. It now runs Southend Airport, owns property that includes Carlisle Airport, is a biomass supplier for anaerobic digesters and has a railway and civil engineering business.
Succession planning
But tensions remained. Mr Ferguson recognised that Stobart needed a safe pair of hands and headhunted Warwick Brady, the chief operating officer at easyJet, who had worked closely with Stobart since 2011. But how could Mr Tinkler be finessed into stepping aside? When Mr Brady replaced him as chief executive in mid-2017, a “value creation unit” was created for Mr Tinkler called Stobart Capital. This let him focus on what he does best: “seeking out new entrepreneurial initiatives” with access to external funding and expertise.
Emotional pay
But keeping Mr Tinkler in check was clearly a challenge. Pay reared its head. He concluded that Mr Brady might earn more than he had. Then an outburst when it was reported last December that Ms Palmer-Baunack, now on a private-equity style package at BCA Marketplace (BCA), had netted shares worth £29m for hitting her growth targets. What rankled with Mr Tinkler was that she and Mr Ferguson had reduced his pay package. Last year, Mr Tinkler received £5.5m, mostly from maturing share awards, and hardly a “pittance”, yet in a letter to shareholders just ahead of the annual meeting, Andrew Wood (a Stobart non-executive director) alleged that Mr Tinkler pressed for an ex-gratia payment of shares worth £8m to redress the balance – an account that Mr Tinkler challenges. And just as well, for it would have flouted corporate governance principles.
A deal too far
This letter was necessary, since by then Mr Tinkler was at loggerheads with Mr Ferguson and Mr Brady, and shareholders needed to know what was going on. It seems that Mr Ferguson grew increasingly concerned about “challenges posed by Mr Tinkler”. For his part, Mr Tinkler says that this reached “a critical point” when he realised that Mr Ferguson was attempting to remove him from the board. The gloves came off on 5 June, when Mr Tinkler forced Stobart to call a shareholder meeting about replacing Mr Ferguson as chairman. On 14 June, Mr Ferguson sacked him and the letter to shareholders was published on 15 June, based on an earlier media release on 29 May.
So what was the problem? The letter refers to “contractual issues” and “related party transactions”, in other words, concerns about corporate governance. In February, Stobart announced that it might be making a bid for Flybe (FLYB), which is a tenth of the size of Stobart. This was called off a month later. The precise pattern of events before that is disputed, but the Financial Times reported that Stobart’s lawyers claim that discussions took place about forming a consortium, together with Stobart Capital, “that would acquire part of the company’s airline business before disposing of half of that interest three months later at double the value”, and that Mr Brady blocked it because this would have disadvantaged Stobart’s shareholders.
The consortium consisted of Mr Tinkler, Neil Woodford, Philip Day and “possible others”. Mr Day, a billionaire, owns Edinburgh Woollen Mills and apparently a castle near Mr Tinkler’s mansion in Cumbria, although last year it was reported that he had moved to Dubai and now spends fewer than 10 days a year in the UK. According to the Financial Times, Mr Day says he was only approached for advice and while Mr Woodford confirmed that they had discussions, he said he turned down the plan last November.
Divided loyalties
Nevertheless, Mr Woodford, together with Mr Jenkinson, backed Mr Tinkler at the annual meeting in his attempt to oust Mr Ferguson and replace him with Mr Day. In a letter to his own investors, Mr Woodford said, “Philip Day is my preferred candidate [for chairman because] he has extensive experience managing and leading diverse businesses in challenging environments while delivering excellent returns to shareholders”. He said nothing about the extent of Mr Day’s understanding of corporate governance, nor whether he has experience as a director of public listed companies. Mr Day’s acumen is in retail – he has grown Edinburgh Woollen Mills by buying well-known brands (such as Peacocks, Austin Reed and Jaeger) out of administration. Quite how independent from Mr Tinkler he would have been was never established.
And so the battle-lines were drawn for the annual meeting on 8 July, with the maverick old guard in one corner, backed by Mr Woodford (with 20 per cent of the votes), attempting to unseat the guardians of corporate governance backed by his old company, Invesco Perpetual (with 25 per cent), in the other. Both sides accused the other of destabilising the business. Employees were in turmoil, too. Complaints flew about bullying and whistleblowing.
Bending the rules
Ahead of the meeting, Stobart controversially donated shares from its Treasury (where they were owned by the company on behalf of shareholders) to its Employee Benefit Trust (owned by trustees on behalf of employees). Since the donation equated to 2 per cent of Stobart’s total number of shares, Mr Tinkler sees this as “gerrymandering”.
The purpose of an EBT is to release shares to satisfy maturing share awards, so good practice requires that the number held in trust should relate to the number of outstanding awards. Shares held in Treasury have no voting rights but EBT shares do, although trustees normally abstain unless (critically) they consider it to be in employees’ interests to vote.
The will of shareholders
In the event, Mr Ferguson was re-elected with just 51.2 per cent of the votes and has subsequently announced that he will stand down next year. The finance director, Richard Laycock, resigned just ahead of the meeting and the three remaining directors, including Mr Brady, were each re-elected.
Curiously, shareholders then voted to reinstate Mr Tinkler as a director. The board sacked him again the following day. Unsurprisingly, Mr Tinkler is crying foul. The directors are now looking for ways to buy his shares.
Responsibility
Mr Woodford is unbowed. “My considered view is that the Stobart Board needs a new chairman to restore stability,” he told his own investors, without saying how the instability came about in the first place. Normally directors resolve differences in private, rather than in the public eye (leading to 'old boys club' type allegations) or, as Mr Woodford put it, “People often criticise fund managers for failing to engage with boards appropriately. Yet, in this instance, Woodford is being criticised for doing precisely that.” True, but this is not the first time that Mr Woodford’s judgement has been called into question. Other shareholders will have their own views about whether the disruption at Stobart has been worth it.
