You’re Kidding

Spotless Chief Executive Bruce Dixon has given notice that he is stepping down from the top job less than one year after the business relisted on the ASX. The reasoning for quitting his full time executive role was to help his son with his career. However reasonable that may sound, the long and short of it is that shareholders are getting the short straw. Dixon provided the following comments on 23 April 2015 regarding his decision to step down in December 2015.

“I just felt the timing is right. The company is in great shape with record revenue and record profit. I wanted to give the board and the market a long lead time.”

Perhaps we missed something here, a long lead time? The truth of the matter is that Dixon should not have continued as CEO on listing. However, a little history is important in understanding why this did not happen. In 2012 private equity group Pacific Equity Partners (PEP) took Spotless private after it was approached by Dixon with the idea. In less than two years, Dixon, with the assistance of PEP, rapidly transformed the business just in time to re-float onto the exchange, which it did in May 2014.

Understandably, the importance of Dixon remaining on as CEO was paramount in order to get buy in from new shareholders. Fast forward ten months and Dixon wants out. With fortuitous timing PEP was able to offload another swag of stock during March bringing its shareholding down to 18.9% while Dixon’s thirteen million shares remain in escrow until the end of the 2015-16 financial year.

Even Chairwoman Ms Jackson was taken by surprise noting;

“It is maybe happening earlier than expected but I have to say thanks to Bruce for giving us plenty of notice.”

In the meantime, shareholders are left in limbo while the search for a new CEO is underway. All up, this is not a great deal for those new equity holders who rightly expected Dixon to lead the business for a period of time. No one can give guarantees in life but to exit so early in the piece and return as a board member, which is Dixon’s intention, is not a good look and raises a number of longer term governance issues.

Disclosure: Selector Funds Management did not participate in the float and is not a shareholder in Spotless.

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