Australian retailer warned over row

Australia's market watchdog has warned the protagonists in a boardroom row at the country's biggest retailer to come clean about their intentions or risk damaging the market as a whole.

The row, which has engulfed executives at Coles Myer, is a succession fight following the announcement that chairman Stan Wallis will step down at November's annual general meeting.

The publicity the fight has attracted, warned the Australian Securities and Investments Commission (ASIC), means that those involved need to come clean about what they are trying to achieve.

"The current instability at Coles Myer is a serious cause of confusion and concern," ASIC chairman David Knott said in a statement.

Row over timing

The board-level warring is not over whether Stan Wallis should step down, but about when.

A set of major shareholders - together with a number of the directors led by the former executive chairman Solomon Lew - wants Mr Wallis out of the door immediately.

The main shareholder fighting against Mr Wallis is Premier Investments, which controls 4.7% of Coles Myer shares.

It, in turn, is controlled by Mr Lew's own Century Plaza retailing group.

Coles Myer shares have lost 37% of their value since February, as investors have signalled a loss of confidence in Mr Wallis, whose turnaround strategy involves selling off the underperforming department store chains Grace Bros and Myer to concentrate on selling groceries.

Mr Lew's band of dissident directors believe the strategy is mistaken.

Dirty linen

So far that battle has been carried out in a sequence of board-level manoeuvres, including an unsuccessful attempt to oust Mr Wallis at an emergency board meeting on 11 September.

Now, though, the row appears to be going public - and the regulator is unhappy with the consequences for shareholders.

With the November meeting likely to demand far-reaching decisions over the composition of the board and the future of the company, shareholders "need to be fully informed of the contested issues and of any differences in strategic direction being advocated for Coles Myer by relevant directors or shareholders", ASIC's Mr Knott said.

"The current level of publicly available information about all of these matters is inadequate."

The company, Mr Knott warned, now risks being "undermined by prolonged instability at board level", damage which might have "serious implications for the broader market".

The instability shows no sign of decreasing, however.

Premier Investments chairman Ron Brierly has described Mr Wallis's five years at the top as "little short of disastrous".

But the Wallis camp has in turn been briefing against Mr Lew.

His family's companies supply goods worth A$63m (US$34.5m; £22.3m) to Coles Myer each year, while a number of companies in which he has an interest - such as women's clothing retailer Witchery - are in direct competition with Coles Myer outlets.

That, the Wallis camp says, constitutes a conflict of interest serious enough to warrant Lew's removal from the board in November as well.