Excelsior Capital (ASX:ECL)

Last week, I and several other shareholders in Excelsior Capital (“ECL” or the “Company), delivered formal notice under section 249D of the Corporations Act 2001 (the “Act”), requesting the directors of ECL call and arrange a meeting of the members of ECL to consider and vote on the following resolution:

That the directors of the company (“ECL”), promptly after the passing of the resolution, and subject always to their legal duties as directors, take all steps reasonably required to do the following in the following order:

  1. obtain professional advice on maximising the saleability and near term market value of ECL’s “CMI Operations” business;
  2. promptly act on the advice received;
  3. promptly obtain a valuation of the “CMI Operations” business;
  4. promptly and actively market the “CMI Operations” business for sale and engage with potential purchasers of it in the manner of a willing but not desperate vendor;
  5. provided an offer to purchase the “CMI Operations” business is received, and the offer is on reasonable commercial terms (with consideration being given to, inter alia, the procured valuation), accept the offer and effect the sale of the “CMI Operations” business; and
  6. upon the sale being completed and sale proceeds being received by ECL, distribute to ECL’s shareholders the net sale proceeds as:
    1. a fully franked dividend, to the maximum extent possible;
    2. (insofar as that does not wholly account for the net sale proceeds) a capital return, to the maximum extent possible;
    3. (insofar as that does not wholly account for the balance of the net sale proceeds) an unfranked dividend, to the maximum extent possible.


After the Company’s Directors failed to reply to our request, our Group filed a substantial shareholder notice on Friday, attaching the requisition request, in an attempt to force the Board to respond.

Today, the Board has finally acknowledged our request, as can be seen here Notice received under section 249D of Corporations Act


In summary:

  • At current prices, ECL trades below its Net-Current-Asset-Value (“NCAV”), a situation that is normally reserved for highly distressed businesses.
  • Using conservative multiples of EBIT, ECL’s Electrical Components division alone should be worth AU$50-70m (AU$1.75-2.40 per share)
  • In addition to this business unit, ECL has an investment portfolio worth ~AU$0.65 per share and a franking credit balance worth an additional ~AU$0.80 per share
  • Therefore, at current prices of AU$1.20-1.25, the shares are trading at a discount of 60-70% to its Intrinsic Value
  • We propose that ECL seek to obtain a valuation of the Electrical Business, attempt to sell it and if successful, return the proceeds in the most tax efficient manner to shareholders


Business overview

ECL has a long history as a “mini-conglomerate” having first listed on the ASX in 1993. Today, the former Conglomerate is down to one Operating Company and a portfolio of cash + investments.


CMI Electrical Products (the “Operating Company” or “Electrical Components” division) specialises in the manufacture and distribution of electrical cables and associated components for industrial, mining, infrastructure, commercial, petrochemical and information technology application throughout Australia and the surrounding regions.


Their products have very dominant market positions, and while they depend on cyclical end-markets, they have an element of “replacement demand” as evident when looking at the long-term track record below:



2012 was the peak of Australia’s mining boom.


Legend Corporation and Adamantem Capital

In August 2019, Adamantem Capital (an Australian PE fund) acquired Legend Corporation (a formerly ASX listed company that operates in the same industry as CMI – electrical cables and connectivity products) for cash consideration of $79m. Legend had approx. $24m in net debt was generating ~$10m in annual EBIT. Therefore, the acquisition price amounted to an EV/EBIT multiple of ~10X.


As part of the acquisition process, Legend was required to have an Independent Expert review the price for appropriateness. They provided a good summary of transaction data in the trailing 5 years:



    • 1993-2004
      • IPO, acquisitions, doesn’t really do much etc.
    • 2005
      • RP Prospects (Ray Catelan’s investment vehicle) first appeared on the CMI share register
        • Ray founded RP Data, a provider of residential and commercial real estate information
    • 2006
      • Ray Catelan becomes substantial investor in November, with 9.8% of the shares
      • Company proposes a strange transaction which would have allowed the CEO (Max Hofmeister) and largest holder at the time (14%) the ability to gain control through ordinary shareholders receiving $1.20 per share in cash + 1 new Class A share
      • Don’t think this was approved at the Shareholder meeting
      • Greg Nunn (Farallon Capital) pops up on the register with a 6.8% holding (wealthy Australian investor)
    • 2007
      • Ray’s position now up to 19% at the start of the year
      • Hofmeister set to retire from the Company and agrees to sell his holding to Ray, pending shareholder approval as it would push Ray’s holding past 20% (item 7, section 611 of the Corporations Act)
        • Hofmeister had been CEO since ’93 and I’m guessing quite old at this point, however, it seems like Ray pushed him out
      • Ray’s position now over 30% and he becomes Managing Director
      • Danny Herceg, Ray’s lawyer with experience in restructuring and Company floats on the stock exchange, joins the Board
      • Farallon buys another 2% and now owns 8.9%
      • MMC Contrarian (not around anymore, but founded/run by well known Aussie value investor) buys 5%
      • Consider spinning the three operating businesses off into separate public entities, but decide it’s too costly. Instead decide to try and sell finance and engineering divisions, while retaining electrical
    • 2008
      • Engineering business, excluding TJM, is sold to Max Hofmeister (former CEO) for $51m
        • Discount to the $60m book value and the company will lend the buyer’s Group $17m
        • In the accounts, it looks like after all costs they netted $27m
      • In Q2 they stop paying dividends on their Class A shares (preference)
        • Then in September 2008 they propose to buy them back at a price of $1 per share
        • The preference shares were paying $0.14 in annual coupons, so offer seems attractive from the Company’s perspective, but obviously sketchy practices given they cancelled the dividend a few months earlier…
        • Cancelled this idea a month later as the financial markets collapsed
      • In November, they sell 51% of the finance division. Basically, a $1 deal as it was bleeding cash and had a nil book value
      • Ray’s nephew joins the Board (worked with at RP Data but smells like nepotism) and he personally begins to buy stock
      • Ray continues buying stock under the creep provision, ends the year at 34%
      • In December, Trojan Equity (another well known Aussie value manager) takes the Company to Court, saying that Class A holders should now get voting rights due to their coupon payments being in arrears
    • 2009
      • Supreme Court sides with Company saying that payments are not in arrears and therefore, A’s have no voting rights
      • Trojan Equity makes an appeal, and also requisitions a meeting to Wind Up the Company
        • Company enters into an agreement with Trojan and other Class A holders, to seek shareholder approval to buy them out at $0.63 per share
      • Rest of Finance Business sold for $300k
      • Ray continues buying, ends the year around 36%
        • Also buys quite a few of the A’s
    • 2010
      • Make an impairment charge to the loan provided when they sold the Engineering business, due to uncertainty around repayment
        • Wrote off approx. 50% but debtor still obliged to make interest payments on original face value
      • Farallon sells their holding and Leanne Catelan (Ray’s daughter) pops up with a ~10% holding…
    • 2011
      • In January, Gerry Pauley and Gordon Elkington submit to the Takeovers Panel that there is an association between Ray and Leanne Catelan, Michelle Moore and Denis Catelan. They seek to have the acquisition of shares undone
        • Leanne seeks a stay order and receives it, this goes back and forth before she finally concedes in December 2012
      • In February, Takeover Panel says obviously they’re related parties, therefore, the acquisition was a breach and the shares must be vested to the Government so that they can orderly sell them and return proceeds to Leanne
      • Vote to buyback A’s fails, also announces new strategic direction, with no intention to pay any dividends until July 2013, as they build cash to pursue acquisitions
      • Trojan requisitions another EGM to Wind Up the Company
        • 58% of shareholders vote in favour, but requires 75%
      • Trojan requisition another EGM to remove 2 Board member and put Erik Metanomski (cofounder of Lanyon and MMC) in
        • Around the same time Ray passes away
        • This vote fails too
      • Trojan takes the company to Court again, claiming it should be Wound Up and pay damages to minorities due to Oppressive and Discriminatory conduct by the Board
        • Court date set for March 2012
      • Colin Ryan takes role as Executive Chairman
      • Engineering loan not repaid, looking into options
    • 2012
      • Write off rest of loan in Feb
        • Company goes into Administration in April
      • Company enters into deed with Trojan wherein the Company will buyback the A’s at $0.95 and pay Trojan’s legal costs
        • Will cost $26m for the buyback, funded via cash and new $7.5m loan
        • May 2012 shareholders vote in favour of A’s buyback
      • September, they release the first Investor Presentation I’ve seen
      • Mr Lonie appointed Director
      • Leanne (via Tinkerbell holdings) ends the year at 38% ownership as she had to give back the ~10%
    • 2013
      • ASIC sells Leanne’s holding to Acorn Capital (small cap fund manager) in a block at $2.65 (13% premium)
      • Colin Ryan (Exec Chair) gets convicted of a financial crime in New Zealand
        • Leaves the Board a few months later
      • Mr Lonie leaves the Board
      • Ross Rolfe appointed to Board
      • Annual report says that dividends are back, targeting 40% pay-out-ratio
    • 2014
      • Rolfe and Herceg leave Board, Andrew Buckley and Jeff Forbes (former CEO and CFO of Cardno) appointed
      • Considering strategic options for TJM Products division
        • Enter into discussions with parties later in the year
      • Rolfe sues them for money he was supposed to be paid as incoming MD. Company settles for $250k
    • 2015
      • Sells TJM for $24m in Feb
        • Company now has $30m in cash, and plans to acquire resources assets (Buckley’s background) and grow EBIT substantially in next 5 years
      • August, they announce capital management initiative to return $22m to shareholders
        • Buckley leaves Board and eventually resigns from Company
    • 2016
      • Forbes steps down from Board, Steve Miotti and Craig Green join
      • Acorn sell out, Leanne buys more and finishes the year with ~40%
      • Propose to change business to Investment Entity, so that it can invest the cash in stocks
        • Name change to Excelsior Capital (HoldCo)
        • Will invest excess cash via Glennon Capital
        • Also announce off-market buyback for 10% of the Company at $1.25
      • Mark Langan appointed CFO and Michael Glennon appointed to the Board (Aussie fund manager)
    • 2017
      • Leanne’s position now up to 44% (buyback)
      • Sets up a new investment management company with Glennon
      • Glennon becomes exec chair, Miotti steps down and Leanne becomes exec director
      • Spill vote triggers
        • “Two Strikes” legislation means if 25% of the votes cast are against the remuneration report, for two consecutive years, the company must put a “spill resolution” on the docket. If it passes, all directors are booted out.
        • Obviously due to Leanne’s holding the spill vote fails
      • Langan out and Cohen in as CFO
    • 2018
      • Announce 10% buyback at $1.44
    • 2019
      • Cohen steps down replaced by Copeland
      • Glennon and Green leave, replaced by our old friend Herceg
      • Leanne sells Potts Point house for $34m (>2X the value of her stake in ECL)
    • 2020
      • Copeland steps down, replaced by Schweizer
      • Investment management agreement with Glennon renegotiated, will now cease in December 2021
      • Leanne buys stock in March
      • Brent Hoffman now CFO


As you can see, there has been a lot of action with this one small Company over the years. The obvious change since Ray passed, has been the incredible amount of turnover at the Board and Management level.


This post represents my opinion, should not be taken as accurate or financial advice. Please do not rely on any facts or figures in this article, do your own due diligence.

6 thoughts on “Excelsior Capital (ASX:ECL)

  1. Great writeup. Seems insanely cheap. Hopefully your agitation will see the gap between share price and underlying value close. Good luck!


  2. Hi,

    Great analysis, thoroughly enjoyed reading your write up.

    Just wondering how did you worked out the franking credits to be around $0.80 AUD per share?


    Liked by 1 person

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