A new benchmark has been set for what is considered by many investors in Australia and New Zealand to be beyond the pale for remarks by a chief executive.

A controversy over misogynistic comments by the founder of trans-Tasman chemical logistics and manufacturing company DGL shows how damaging it can be to a listed company when its chief executive goes rogue.

The comments drew flak from Kiwi prime minister Jacinda Ardern, triggered a sharp share price slide and may have even contributed to delisting of the company from New Zealand’s stock exchange.

It started like this. Simon Henry, the founder and controlling shareholder in the company once known as Dangerous Goods Logistics, gave an extraordinary interview with the National Business Review, which compiles New Zealand’s rich list.

Henry opted to compare his fast-growing business to the meal kit delivery business My Food Bag, which had floated at the same time as DGL but which had since nearly halved in value. He aimed his barbs in particular at My Food Bag’s founder Nadia Lim, who, he said, had used her “sensuality” to sell the company.

“I can tell you, and you can quote me,” Henry told the NBR reporter, “when you’ve got Nadia Lim, when you’ve got a little bit of Eurasian fluff in the middle of your prospectus with a blouse unbuttoned showing some cleavage, and that’s what it takes to sell your scrip, then you know you’re in trouble.”

The reputational damage for DGL was spectacular, suggesting comparisons with the famous gaffe by British businessman Gerald Ratner who referred to the products of his British jewellery chain as “total crap”.

Ardern described the comments as “insulting to all women”, while Nicola Willis, deputy leader of the opposition National party, said Henry had a “completely outdated world view”. Some investors who said they would no longer buy DGL stock and Ixom, one of its biggest customers, expressed concern at the “insulting” language.

Lim, one of New Zealand’s best known entrepreneurs after she appeared on MasterChef and Dancing with the Stars, said that the remarks by Henry could have a wider impact on younger women and people of colour who may hear such things and feel less capable than their peers.

A terse apology by Henry was proffered to Lim and the board of the company announced a review of DGL’s culture. The board statement described Henry’s comments as offensive and unacceptable.

“In Australia, a few companies have been criticised for being woke lefties. This is the opposite of that and you can see the value destruction it has caused,” says shareholder activist and journalist Stephen Mayne. “It is a salutary lesson: stick to your knitting and don’t get involved in needless ‘culture war’ fights in the era of ESG [investing along environmental, social, and governance principles].”

DGL had previously appeared to be the epitome of a quiet success story, a business valued at more than A$1bn ($719mn) that was built up by rolling up the fragmented market for storing, transporting and making fertilisers and pesticides for the agricultural sector and purification chemicals for water companies.

The company had floated in May last year at the height of Australian and New Zealand pandemic lockdowns and delivered a more than fourfold rise in its share price. However, shares in the company crashed by a third in the weeks following the comments being made public. That wiped out at about A$400mn of DGL’s market value.

More sparks flew when DGL said last week that it would cull its listing in New Zealand to save costs as trading in its stock was negligible there, transferring the shares to the Australian exchange where it was also listed. The head of the NZX instead suggested that the move was a reaction to the backlash over Henry’s comments, despite DGL saying the delisting had been in the works well before he opened his mouth.

In a market where takeovers of listed companies by private equity is at a record high, a dented DGL might look like a prime takeover target. But Henry has previously dismissed private equity ownership as an unpalatable option.

The incident is also a reminder of the risks investors take when a chief executive is dominant. Henry not only has a controlling 57 per cent stake, but has operational control as chief executive and sits on a board of directors that only runs to five members. A lot rides on the judgment of the CEO.

Author's email: nic.fildes@ft.com

It was little more than a decade ago that ANZ harboured ambitions to become a “super-regional” financial powerhouse as it bought up banks across Asia.

That plan was abruptly abandoned six years ago when the 187-year-old bank admitted the expansion had not worked. It sold off the retail and wealth management operations it had fought hard to build in countries including Hong Kong, Singapore, Indonesia, Taiwan and China, where it owned a fifth of Shanghai Rural Commercial Bank.

It sought to refocus on its core Australian and New Zealand markets and institutional banking operations. The problem for the bank was that it fared little better in its home market despite a booming housing market.

ANZ is the smallest of Australia’s “Big Four” banks that dominate the domestic market — alongside Commonwealth Bank, Westpac and NAB — and its mortgage market share has dwindled in recent years as the bigger guys got bigger and upstarts in the residential market, Macquarie and AMP, began to bite.

Shayne Elliott, the chief executive who has led the bank since 2016, has moved to remedy the situation with a $3.3bn (A$4.9bn) takeover of financial group Suncorp’s banking arm. The move could be described as an old-fashioned regional play — versus the more exciting super-regional push into Asia of old — as it will transform the Melbourne-based bank into a significant player in the sunshine state of Queensland, which has been growing faster than other parts of Australia.

It is the biggest move to consolidate Australia’s lucrative banking market in the 14 years since the financial crisis and it is part of a broader global trend whereby powerful national banks give up on their international ambitions and focus instead on expanding in their home markets. Notable in-market deals have included Bank of Montreal buying Bank of the West from France’s BNP, Citizens buying HSBC’s American operations and a merger of M&T and People’s United Bank.

Citigroup is a case in point after it scrapped its global consumer banking division this year to boost its performance against key US rivals. The sell-off has seen it leave markets including Mexico and Australia, where NAB picked up Citi’s residential Aussie business for A$1.2bn in June.

In that context Elliott felt confident enough to call his Suncorp play a “once in a lifetime” opportunity for ANZ and represented the reward for the bank’s restructuring and international exits in recent years.

Critics were however quick to cry “same as it ever was” about the deal. ANZ may be absorbing a juicy A$47bn mortgage book by buying the Suncorp division, which will increase its market share to around 15 per cent, according to investment bank Jefferies. But that takes its share to roughly where it was four years ago — so the bank is effectively making up for lost ground and paying for the privilege.

Others noted that Elliott has just added a huge amount of cost and complexity into the business having spent years doing the opposite. Integration costs are estimated at A$680mn which seems high for a deal that won’t generate its full synergies for five years and ANZ has committed to running two banks for the foreseeable future as it won’t shut down branches or even replace the Suncorp brand.

Westpac unhelpfully rammed home that point when it unveiled a simplification plan to integrate its own regional banks — bought in 1997 and 2008 — to save costs only days after ANZ’s big deal was announced. That led some analysts to argue that ANZ was showing ill discipline with a big complex merger at a time when its core business was struggling to match up to its rivals.

The takeover also attracts other types of risk. The competition regulator in Australia has often complained that the Big Four — which control three-quarters of the home lending market — represent a “cosy oligopoly” in need of more competition. The collapse of Volt, one of the last of a crop of so-called “neo”, online-only banks this year has removed another potential thorn from the Big Four’s side. There is a real risk the once-in-a-lifetime deal could be blocked.

Yet investors may be assuaged that ANZ’s strategic angst hasn’t manifested itself in more radical form. A week before the Suncorp deal was made public, the bank said it had entered talks with private equity company KKR to buy accounting software company MYOB at a cost estimated by analysts at around A$4.5bn. That head-scratching deal to combine business lending with accounting technology left some wondering how much M&A discipline ANZ had learned from its international spree going awry. After the Suncorp deal was announced, the bank stepped back.

Author's email: nic.fildes@ft.com