Leighton’s king-hit . . . so where’s Wal?PUBLISHED: 26 Aug 2011 00:01:00 | UPDATED: 26 Aug 2011 08:24:16PUBLISHED: 26 Aug 2011 PRINT EDITION: 26 Aug 2011
Jenny Wiggins and Angus Grigg
Moving up . . . on Monday night Hamish Tyrwhitt was summoned to Leighton’s in Sydney from Kuala Lumpur. ‘I was just asked to come and see the board.’ Photo: Nic Walker
It was Tuesday night when David Mortimer realised he’d been ambushed.
The Leighton’s chairman heard rumours that the group’s biggest shareholder, ACS, was pushing to replace David Stewart, the chief executive of just eight months. Stewart had been Mortimer’s choice.
Taken by surprise, Mortimer called an emergency board meeting, triggering a chain of events that would end with his own resignation and the appointment of Hamish Tyrwhitt, Leighton’s Asian business head, as new CEO.
The coup is sweet revenge for former Leighton CEO Wal King, who was driven out of the top job after a row with Leighton’s board last year. He had favoured Tyrwhitt to replace him as CEO when Stewart got the job.
As Tyrwhitt was summoned to Sydney on Monday night, other top Leighton executives had no idea of the impending cleanout.
Leighton’s effective No. 2, chief financial officer Peter Gregg, was in London meeting with investors. He was out of the loop.
The day after Mortimer’s board meeting, the remuneration and appointments committee –which is chaired by Mortimer – was convened for 8am.
Only one candidate was interviewed and by 11am the committee had agreed upon recommending Tyrwhitt, a father of five boys.
By lunchtime, Leighton’s had a new CEO. But it had lost a chairman.
Sources say Mortimer wanted to give Stewart more time in the top job to prove himself, given he had been CEO during a particularly traumatic time for Leighton.
Equally the chairman was fed up with internal politics. At 2.02pm, an announcement appeared on the Australian Securities Exchange saying Mortimer had resigned.
So when the remaining board directors gathered at Leighton’s North Sydney headquarters at 5.30 on Wednesday evening, they were without a chairman.
Stephen Johns, a 30-year veteran of Westfield Holdings and a Leighton board member since 2009, was immediately appointed chairman.
His first order of business was to dismiss Stewart, who was informed by a telephone call on Wednesday night that he had been replaced.
Johns yesterday insisted discussions over the length of Stewart’s tenure had been going on for some time and that the decision to replace him was unanimous.
“It was a full Leighton board decision,” he said. “There were no conflicts of interest, there was no undue influence from anybody.”
But others familiar with the inner workings of the board say Tuesday evening was the first time many had heard of the plan to remove Stewart.
ACS, which is Leighton’s ultimate parent because it effectively controls 54 per cent of the company through its holdings in Hochtief, wanted Tyrwhitt. If they hadn’t got what they wanted through the boardroom, they could have exercised their power as the group’s largest shareholder and called a special meeting to appoint the new CEO.
Johns yesterday insisted ACS played no role in the decision to replace Stewart with Tyrwhitt.
But insiders disagree.
Hochtief’s new CEO, Frank Stieler, who was installed by ACS earlier this year after the group completed its takeover of the German company, and has a board seat at Leighton, has been a frequent visitor to Australia.
After several visits to Australia in recent months, including a trip last week for Sydney’s City to Surf race, he was unimpressed with Stewart and had been agitating for a change of CEO, a person familiar with the company said.
After briefly returning to Europe, Stieler was back in Sydney on Monday, ostensibly to visit Leighton’s troubled Victorian desalination plant.
On Monday night, Tyrwhitt was asked by Leighton’s board to fly to Sydney from Kuala Lumpur, Malaysia.
Tyrwhitt yesterday declined to comment on what reasons he had been given.
“I was just asked to come and see the board,” he told The Australian Financial Review.
Hochtief yesterday acknowledged its role in the changes and said it was “supportive” of the board’s decision to appoint Tyrwhitt.
“We have been part of the decision to appoint Mr Johns and Mr Tyrwhitt through our representation on the board of Leighton and we fully support both managers and the company.
“We recognise that this is the best way for the business to move forward and capitalise on the significant growth opportunities ahead.”
Leighton, notwithstanding its recent $907 million profit write-down, is the most valuable part of Hochtief’s shrinking empire, contributing the majority of its operating earnings.
Consequently ACS – which is suffering from the slump in Spain’s construction market and needs income to pay off debt of around €8.08 billion ($10.8 billion) – has a keen interest in seeing Leighton restored to sound financial health.
Since taking control of Hochtief in May after a long takeover battle, the Spanish have made no secret of their desire to exert more influence over Leighton.
Although ACS has insisted it intends to maintain a hands-off approach to Leighton, it has quickly made its presence felt.
Leighton is now in the process of changing its reporting periods to align them with ACS, moving to a December 31 reporting date.
ACS’s changes at Hochtief and Leighton also have the support of its shareholders, with one shareholder telling the Financial Review he was “bothered” by the way Leighton’s $907 million write-down in April and subsequent capital raising was handled by the outgoing chairman and CEO.
“ACS are arguably some of the best in the world in terms of managing complex operations and have some of the best risk management procedures,” the shareholder said.
“Clearly tremendous shareholder value has been destroyed at Leighton and that hurts both Hochtief and ACS shareholders (we are both). I hope [the management changes] allow Leighton to get back to what it does best with minimal distraction.”
Tyrwhitt was Wal King’s choice of successor in the battle to replace the longtime chief last year. Stewart was however favoured by Hochtief’s outgoing management, which then controlled four board seats on Leighton’s 12-member board.
Although Tyrwhitt and King are understood to be friends, Johns yesterday ruled out any chance that King –who has been a consultant to Leighton since retiring at the end of last year – will return to the board.
Johns declined to specify yesterday exactly why Stewart was no longer suitable to run Leighton, but said the board was looking for a new “leadership style”.
Tyrwhitt is perceived to have a more confident manner than Stewart, with some analysts noting that Stewart looked “a bit nervous” at conferences.
Analysts also pointed out that ACS and Hochtief would welcome Tyrwhitt’s Asian experience as they sought to diversity their own operations away from Europe.
“Leighton has that Asian footprint that the Europeans don’t.”
Bill Wild, Leighton’s former deputy chief executive, yesterday lent his support to the management change. “Hamish will do a great job: he’s a very good leader and knows the organisation extremely well,” Wild said.
“He’s a very good motivator of people, he has a firm view of what makes a good construction business, and he engenders confidence in people.”
Tyrwhitt claims he has a “can do” attitude. “I am a very visible manager, I spend a lot of time visiting projects, engaging with our people,” he said yesterday, adding he liked to “empower” people.
Describing himself as “a Leighton boy” who was on good terms with other longstanding Leighton executives, Tyrwhitt said that becoming CEO had been “an aspiration of mine for some time” and that he had been first approached for the job 10 years ago.
Stewart, who is understood to have been sacked and declined to comment yesterday on the management changes, had more than four years to run on his contract at Leighton.
The company had the right to terminate this contract with 12 months’ notice.
That means Stewart should receive his $2.4 million annual salary, plus a potential bonus of $3.6 million.
He is also entitled to $1 million after serving out a 24 month non-compete period.
The Australian Financial Review