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Paul Little insists the fireworks over the fate of Pacific National is little more than a distraction to his $4.9 billion main game: capturing control of Patrick Corporation.
"Clearly, the Pacific National problem, if you want to call it that, is a sideshow to the whole thing," Little said yesterday when asked to respond to the resignation of PN's chief executive, Stephen O'Donnell.
"In the end, we think a break-up of Pacific National, should it ever happen, would take between 12-18 months, which means the takeover will be over well before any conclusion to that dispute."
That's a maybe. But O'Donnell's brutal six-paragraph resignation letter is far more than just another incendiary moment in the rapid, and now complete, disintegration of the relationship between Toll and Patrick.
O'Donnell's claims of threats and intimidation will grab the headlines. But, as serious as that is, he makes another claim which will have a far greater resonance in Toll's Patrick hunt.
After saying he had been threatened and noting the "irreparable breakdown of the relationship" between Toll and Patrick, O'Donnell entered more contentious territory. "Additionally," O'Donnell told his two shareholders, "the aberrant behaviour by one of the Toll employees accountable for the PNQ contract, who now refuses to accept my termination of his secondment to Pacific National, confirms in my mind the need to resign as CEO."
The PNQ contract referred to by O'Donnell is between PN and Toll's Queensland subsidiary, Toll North. Under the terms of a 20-year take-or-pay deal, Toll controls all of PN's Queensland rail capacity. It means, bizarrely, that PN has to pay Toll to use its own trains in Queensland.
And Patrick argues it means a lot more. It reckons PN will lose $510 million in revenue over the life of the contract. After failing to get a formal board review of the contract, which included a request to investigate whether the deal was "induced by fraud, misrepresentation, or misleading and deceptive conduct", Patrick is attempting to use the joint venture's dispute settlement rules to break up PN. But, while Toll and Patrick went at it, O'Donnell conducted his own investigation of the disputed deal.
His conclusions, it would seem, are far from comforting.
On Monday October 10, O'Donnell attempted to remove a Toll employee on secondment to PN. The employee, who led the PNQ negotiations, was told he would be returning to work with Toll. It is understood the Toll man simply refused to accept his termination.
On Wednesday, O'Donnell was told that, instead of backing his decision, the matter of the "purported termination" had been placed on the agenda for next week's PN board meeting.
Paradoxically, another item already on the agenda for that meeting was O'Donnell's own future. He had told Toll and Patrick he wanted to quit because of the instability at PN but agreed to reconsider and to take a final decision to the next board meeting. By Thursday he decided he could hold on no longer.
Which means PN and its unhappy shareholders must now address just who on earth, after reading O'Donnell's resignation note, would want to step into the breech at PN.
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