Australian Agricultural Company (AACo) is one of the companies named in US legal action against its majority shareholder, Joe Lewis, who has been charged with 19 cases of insider trading.
The billionaire’s investment in AACo is run through his portfolio company Tavistock Group, which owns 51 per cent (worth around $450 million) of the pastoral giant.
It is alleged Lewis used information gained as a board member to advise acquaintances whether to buy or sell stock for at least eight years.
The charges relating to AACo allege that in 2019, after the AACo directors’ meeting on 10 February, “a board member employed by Tavistock informed Joseph Lewis, the defendant, that the losses to the company were material, that AACo did not have insurance coverage relating to the cattle it lost in the flooding and that the Australian government was not expected to cover any portion of the losses”.
It alleges Lewis then told his two private pilots, Patrick O'Connor and Bryan 'Marty' Waugh, about the losses and to sell their investments before the information was disclosed to the market. Neither pilot could complete the trade in time and the following day AACo warned investors there would be a material financial impact, with more than 40,000 head of cattle killed.
An email included in the US indictment from one of the pilots to his stockbroker said, “Just wish the Boss would have given us a little earlier heads up”.
Lewis pleaded not guilty in a New York court. His counsel, David M. Zornow, of Skadden, Arps, Slate, Meagher & Flom, said “The government has made an egregious error in judgment in charging Mr Lewis, an 86-year-old man of impeccable integrity and prodigious accomplishment. Mr Lewis has come to the US voluntarily to answer these ill-conceived charges, and we will defend him vigorously in court.”
The Australian Securities and Investments Commission said it would review the US indictment to assess whether there was conduct that was actionable in Australia.
The ASX asked AACo if a board member had shared information contained in the announcement “prior to its release with Mr Lewis or a representative of Mr Lewis”.
AACo’s response was: ““Enquiries have been made of the two relevant board members. Based on the information available to AACo, including information provided by the two relevant board members, the answer is ‘no’.”
Annual General Meeting
The revelations out of the US came a day before AACo’s AGM, at which chair Donald McGauchie said it was clear premium beef brands would be the driver of AACo’s future and its environmental initiatives had the company moving in the right direction to meet global sustainability challenges.
McGouchie said, “We have achieved five consecutive years of positive operating cashflow. The team have demonstrated operational resilience in the face of ongoing challenges, and we have continued to invest significantly in our brands, our assets, and our people.
“Most importantly, these outcomes are confirmation that premium branded beef is the future of this company.
CEO and managing director David Harris said two highlights were a 35 per cent increase in operating profit and a 14 per cent improvement in total revenue.
“Our brands helped generate price increases in all our major markets and an overall 18 per cent increase in meat sales.
“We also recorded an almost $300 million increase in the value of our pastoral property and improvements,” Harris said.
With live cattle sales accounting for around 20 per cent of AACo’s revenue last year and “may still be impacted in the future”, he said.
McGouchie added that the company’s sustainability strategy was a “living document” that would be continuingly redefined for maximum positive impact.
“I don't think any of our founders could’ve imagined AACo would have a role to play in our weather. But we all do – and I am proud to say that AACo’s commitment is at the global forefront. Importantly, we are only at the beginning of truly understanding the scale and complexity of this work,” he said.
