Rich battles for control of Morningstar

Morningstar Research boss Graham Rich is filing for damages against the group’s US based majority shareholder, Morningstar Inc.

Wednesday, November 21st 2001, 10:57PM

by Jenny Ruth

Chicago-based Morningstar Inc is locked in a battle for control of its Australasian operations with partner Graham Rich and his company Fiduciary.

Morningstar Inc is the majority shareholder in the Australasian business, Morningstar Research Pty, owning about 55% of the business, and Rich's company Fiduciary owns the balance.

The battle is due to reach the New South Wales Supreme Court on Friday and has already claimed one victim.

Former New Zealand finance minister Ruth Richardson resigned as chairman of the Australian and New Zealand operations last week.

Essentially, Morningstar is seeking to sack ceo and publisher Rich, citing the Australasian company’s poor performance, while Rich is claiming the Chicago company "acted in an oppressive manner," breached joint venture arrangements and that its representatives breached their roles as directors. Rich is seeking "substantial damages.’’

In a statement, Rich says that despite the dispute, it is "business as usual’’ for the New Zealand and Australian operations.

He says he is aware of a number of rumours circulating about the downunder operations, some of which "are hopelessly incorrect, and some of them have an element of truth to them.’’

The Chicago company bought into Rich’s Australian and New Zealand business, FPG Research, in April 1999 and that business was re-branded with the Morningstar name.

Rich says because of the legal proceedings he is constrained from "making any detailed comment in relation to the nature of the shareholders’ dispute.’’

According to the Australian Financial Review, the downunder Morningstar businesses reported a $A1.65 million ($2.07 million) net loss for calendar 2000 and accumulated losses of more than $A3 million for the previous year.

Citing documents lodged with the Australian Securities and Investments Commission, it says at 31 December, 2000, the downunder company had $A1.1 million in assets against liabilities of $A2.6 million.

The AFR says the downunder operations have also lost senior staff in the past year, including research head Toby Potter.

It quotes the Chicago company’s international president Bevin Desmond as saying her company has been "disappointed that our Australia and New Zealand operations have not been able to live up to (expectations) over the last three years’’ and that it has decided to take remedial action.

"We were disappointed and surprised by Mr Rich's actions, but feel we are acting in the best long-term interest of advisers, our company, and the investment community,’’ the AFR quotes Desmond as saying.

It says the Chicago company became the majority shareholder of the downunder operations in July this year when a loan it had provided for working capital converted into shares.

Rich had been searching for another equity partner and is claiming the Chicago company failed to approve three prospective candidates and that it then unjustifiably became the majority shareholder.

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