Thursday, June 17, 2010

An era ends; Brierley steps down

There really has been a lot of interesting stuff around in Australia over the last day or so.

The announcement that Ron Brierley's CPG (Guiness Peat Group) is to spin-out its Australian operations and that, as part of this, Ron Brieley will relinquish part of his executive responsibilities to Gary Weiss marks the end of an era.

Chatting to someone the other day, I mentioned Industrial Equity Limited. They did not know what I was talking about. I realised that for those under thirty, perhaps under forty, IEL had vanished into the past. After all, it is now twenty three years since the great stock market crash of 1987.

Black Monday 19 October began with a fall on the Hong Kong Stock Exchange that then spread round the world. By the end of the New York trading day, the Dow Jones Industrial Index was down more than 22 per cent. By the end of October, the Australian index was down 41.8 per cent from its peak, New Zealand a wacking 60 per cent.

The years leading up to Black Monday had been somewhat crazy years as corporate raiders stalked the boardrooms, aiming to unlock value for themselves. 

In March 1961 Ron Brierley had formed R. A. Brierley Investments, later known as BIL. By 1984 BIL was the largest company in New Zealand by market capitalization, and in 1987 had 160,000 shareholders, with a stake in over 300 companies, including Paris department store Galleries Lafayette and Air New Zealand.

In 1964 BIL purchased a share in Australian company Industrial Equity Ltd, with IEL becoming the Australian investment vehicle. Throughout the eighties IEL stalked Australian companies, using various raiding techniques.

IEL was not alone. Alan Bond, Robert Holmes a'Court, Christopher Skase and John Spalvins (among others) all built huge empires.

The Black Friday crash did not, of itself, bring the process to an end. It continued for a period in Australia and overseas. In the US, for example, RJR Nabisco was bought out in 1988 by Kohlberg Kravis Roberts & Co. in the largest leveraged buyout at the time, a takeover later featured in the best selling book Barbarians at the Gate.  In Australia, IEL itself acquired Woolworths in 1989, making it a wholly owned subsidiary.

While the crash did not bring the process to an end immediately, it did create pressures that would bring it down once the economy shifted; despite the crash, the Australian economy continued to grow for another two years.

After the crash, BIL itself shifted its focus to a narrower range of investments. As part of this, in November 1989 BIL sold IEL including Woolworths to a new investment vehicle controlled by John Spalvin's Adelaide Steamship Group.

It was a funny crazy period, one that I should write something about at some point. I was on the periphery, but also had some contact with some of the players because of the work I did in Government and then as a consultant. Maybe one day!  


Anonymous said...

Hi Jim

I remember the IEL era very well.

In this post I would suggest a slight addition to give more accuracy: end of fifth para (a single sentence) just add "for themselves"

And I would enjoy reading your extended memory of that "funny crazy period" - you could tag it with "immoral pirates", "ineffective or non-existent regulation" and "the world goes round and round".

Funnily enough one of my most valued, respected clients is a past chairman of one of the biggest targets of that era. I have often wished he would set down his thoughts on business ethics - but why would he, when only a few seem presently interested in such a subject?

You seem to have enjoyed Bathurst. I remember similar trips with my sons, but we were lodged in the old immigration camps some way out of town. Fascinating, but very cold!


Anonymous said...

Sorry, meant amoral pirates.

Although, comparing the two words, I could change my mind again.


Jim Belshaw said...

Hi KVD. Good point. Correction made. The dollar value "released" often had little to do with economic value.

I will write something. From 1973 to 1990 or thereabouts, the work that I did meant that I had a lot of contacts and then clients linked in some way to the whole thing. I cannot give a proper review, but could capture some the feel.