The Financial Review did a good job at listing some of the best (the purchase Stanbroke station, Leucadia National buying into Fortescue) and worst (Telstra acquiring the Trading Post or MIM selling to Xstrata) deals of the past decade.
But while the AFR may have left off a few clangers (such as Centro spending $6.2 billion buying a US property business just before the GFC or the Singapore government spending $350 million buying ABC Learning Centres shares months before the company collapsed) — what is more interesting is seeing just how unaccountable the Australian corporate landscape is. Many of the leading directors who signed off on some of the decade’s worst deals still remarkably remain leading corporate figures.
Telstra’s purchase of the Trading Post
In March 2004, Ziggy Switkowski convinced the Telstra board to pay $636 million for the Trading Post — like many of Telstra’s corporate manoeuvres, the Trading Post buy would end in heartbreak, as the Telco failed to foresee the internet changing the face of classified advertisements. (Telstra’s 2004 annual report claimed that “this strategic acquisition is intended to create a strong presence in Australia’s fastest growing advertising market — local print and online advertising”.)
Not long after the acquisition, Switkowski was replaced by an even more unsuccessful CEO, in the form of smooth-talking Wyoming-born Sol Trujillo.
Donald McGauchie, the Telstra chairman at the time of the Trading Post purchase survived until May 2009, before eventually quitting after Telstra’s NBN fiasco and the disastrous Trujillo experiment. However, it appears that corporate Australia has a very short memory — in April last year, McGauchie was appointed as chairman of beef producer, Australian Agricultural Co and was also appointed chairman of struggling chemicals company Nufarm. McGauchie is a director of James Hardie and remains on the board of the Reserve Bank of Australia.
Another board member at the time of the Trading Post purchase was Catherine Livingstone, who was last year rewarded with the chairmanship of the embattled Telco. (“Aussie” Bob Mansfield, whose corporate career was mortally wounded after Allco’s purchase of Rubicon was also a member of the illustrious Telstra board at the time of the Trading Post acquisition).
MIM selling itself short to Xstrata
Shortly before the commodities boom, the board of MIM (other than its CEO Vince Gauci) thought it would be in shareholders’ interests to sell the company to Swiss-based Xstrata. The timing was, as they say, a tad off — MIM shareholders received $5 billion for a company that within a few years would be worth upwards of $10 billion. (Sensing shareholder anger, the MIM board proceeded with the merger by way of “scheme of arrangement”, which required only 75% of shareholders approve the scheme — as opposed to the 90% threshold for compulsory acquisition under a “takeover”).
Amazingly, the chairman who oversaw the sale, Leo Tutt, remains very well ensconced in Australia’s director’s club. Tutt (who has been somewhat unfairly named “Jabba the Tutt” by some) has been chairman of building supplier Crane Group, which has been one of the poorer performers on the ASX in recent years. Tutt has also managed to retain a directorship of Queensland-based Suncorp Metway, which remains about 60% lower than its 2007 peak.
Tutt wasn’t the only director of MIM who managed to find other fertile corporate pastures. John Astbury after the MIM sale, and has also served on the blue-chip boards of IAG and AMP. was appointed as a director of Woolworths John Crabb continued his directorships at Bluescope Steel and Capral while Mike Eager joined the board of Oxiana, which almost collapsed after an ill-fated merger with Zinifex.
Coles Myer’s sale of Myer to TPG
After years of mismanagement, the Coles Myer board finally had enough of running the Myer department store and sold the business to TPG (and also the Myer family) for $1.5 billion. Within a few years, the private equity owners had made a profit of about $1.6 billion for their investors and made the Coles Myer board looked like prize fools for being unable to run the business and also unable to sell the business for the right price.
While Coles itself would soon be taken over by Wesfarmers, the directors of Coles who sold Myer would remain ensconced in boardrooms across Australia. Chairman Rick Allert, who told Coles shareholders that “selling Myer was a sensible decision for us” is still chairman of AXA Asia Pacific as well as being chairman of Tourism Australia, Aboriginal Foundation of South Australia Inc and Major Performing Arts Board of the Australia Council.
Other Coles directors who continue to grace Australian boardrooms include former McKinsey partner, Patty Akopiantz who joined Allert at AXA Asia Pacific and is a director of Wattyl and Energy Australia and Keith Barton, who remained on the boards of Amcor, Tower and Air Liquide well after the Myer disaster. The corporate world also appears to have forgotten that Belinda Hutchinson was a member of the esteemed Coles board, with Hutchinson going on to chair insurer QBE and even join the external advisory panel of the Australian Securities & Investments Commission.
If the Financial Review’s list of the decade’s worst deals is any guide, it appears that making bad business decisions on behalf of shareholders is no bar to being asked to make decisions for other shareholders.
*Adam Schwab is the author of Pigs at the Trough: Lessons from Australia’s Decade of Corporate Greed, available in bookshops and on-line at Booktopia
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