Kerry Stokes is this morning savouring victory in the heated Seven-WesTrac merger, with 88% of shareholders voting in favour of the deal. But while the media has trumpeted Stokes’ success, a substantial number of retail shareholders were not convinced of the merits of the transaction.

In total, a mere 61% of proxy holders (and 68% of voting shareholders) supported the deal, one of the lowest-ever recorded incidences of ‘rank-and-file’ shareholder support for a corporate deal.

The deal was strongly criticised by corporate governance groups, with both RiskMetrics and CGI recommending that shareholders vote against the merger for corporate governance and value reasons.

The criticisms of the merger were abundant but ultimately, the key question for shareholders should have been this: Do they believe Kerry Stokes is a shrewd businessman? This writer would contend that Stokes, who has amassed a billion-dollar empire over the space of three decades, is one of Australia’s most successful entrepreneurs.

The logical next question is, “Why would you purchase an asset from someone who is not only one of Australia’s most canny businesspeople, but who also has a far better understanding of that asset’s prospects and value?” Buying a company from Stokes (which is effectively what Seven shareholders are doing) is no different from purchasing a car from a mechanic – he knows what’s under the hood far better than you do.

Unlike other corporate deals, combining a heavy machinery company and a television station results in no synergies, either on the revenue or expense sides. Therefore, either Stokes, or Seven’s minority shareholders, are getting the better of the deal. Conveniently for Stokes, aside from hundreds of millions of dollars in tax advantages which stem from the combination, a merger of the ‘cash-rich’ Seven with the debt-laden WesTrac would ensure that his personal solvency is secured.

The warnings that Seven’s share price would plunge to $6.00 from various investment banks advising on the deal, including JP Morgan, Grant ‘Fair and Reasonable’ Samuel and Goldman ‘Vampire Squid’ Sachs, did little to inspire confidence in the transaction. Unlike Seven shareholders, advisers such as Goldman Sachs have a somewhat different time frame for what constitutes a successful merger.

In Goldman and JP Morgan’s case, the deal will be deemed a success around the time they receive their multi-million dollar advisory fees (fees that would be substantially reduced in the event that the proposal were rejected by shareholders).

In one sense, the Seven-WesTrac transaction is highly unlikely to become a debacle on the scale of the Allco-Rubicon deal (which saw key Allco executives receive millions of dollars in cash and was a factor in Allco’s collapse a short time later). Stokes’ ‘skin’ is remaining in the game as a 68% majority shareholder in the new entity and he is not receiving any cash for his interest in WesTrac.

If the Chinese economy slows (as some observers, such as Jim Chanos, claim it will), then the value of WesTrac within the merged entity will drastically fall. This will affect Stokes in a similar manner as it would affect minority shareholders (although Stokes would be adversely affected to a lesser extent than if WesTrac remained privately owned).

Similarly, if the merged Seven-WesTrac entity loses the rights to the Caterpillar brand (which is certainly not impossible), then Stokes too would suffer a substantial reduction in wealth.

After analysing the voting for this deal one fact has become apparent – the so called ‘mum and dad’ shareholders appear to understand the value transfer far better than the alleged sophisticated investors, highly paid advisers, independent experts and independent directors. The likes of Ausbil Dexia and Perennial, who claimed victory in negotiating a 2011-earnings hurdle for WesTrac, may turn out to be the corporate equivalent of George W. Bush standing aboard the USS Abraham Lincoln proclaiming ‘mission accomplished’.