SAI royalties hike fear in $1bn buyout

The increasingly complex business of developing standards and regulations is costly and time-consuming and in its latest 2013 annual review Standards Australia revealed it received $3. 88 million in royalty revenue, while investment distributions and income totalled $10. 6 million. The $3. 88 million in royalty revenue implies that SAI generated almost $39 million in revenue from selling and publishing those standards.

SAI currently only pays a royalty of 10 per cent of the net revenue it receives from the selling and publishing of almost 7000 different standards and regulations across a range of industries, under a sweetheart deal struck when SAI was floated out of Standards Australia in 2003.

Standards Australia chief executive Dr Evans said in mid-June she wouldn’t be commenting about any aspect of the contract with SAI or the renewal process. “It’s a commercial-in-confidence document,’’ she said at the time.

A Standards Australia spokesman said on Sunday that he couldn’t discuss the specifics of the contract with SAI but the organisation had a ”core function which is to develop and adopt standards which add a net benefit to the Australian community’’.

The prospect of a substantial hike in royalty rates which $1. 1 billion takeover target SAI Global may have to pay from 2018 to the over-arching body Standards Australia has the potential to cloud the sale process.

Under the contract agreement which expires in 2018, Standards Australia is also required to regularly review and revise its Australian standards so that no more of 30 per cent of the total collection of standards are more than 10 years old. 5 Bankers say unfair contract laws will push up …

But the benchmarks operating globally where royalty rates are at 50 per cent or higher in most other countries are likely to filter through to Australia as the standards industry globalises further and Standards Australia takes a more commercial approach after an internal shake-up.

In a letter to member organisations in July she said that Standards Australia ”has had a long-standing policy which is that we must live within our means’’. “We remain vigilant to ensure we continue to be financially sustainable for the long term,’’ she said.

Standards Australia received an endowment of $160 million from the proceeds of the public float in 2003, when the staid organisation agreed to spin off SAI on the ASX.

The likelihood of higher rates being applied to SAI if it is successful in renegotiating its lucrative 15-year contract with Standards Australia, which expires in 2018, is a real prospect.

The March 2014 quarterly performance review of the Standards Australia investment portfolio showed it was valued at $235 million.

Read more here: SMH

    

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