A salute to CSL's Brian McNamee
Brian McNamee's cleverly constructed, financially disciplined transformation of CSL into a global business leaves large shoes for his successor to fill.
His tenure is extraordinary, not for its longevity, although by the time he retires next July he will have survived nearly six times the average tenure of a CEO, but for what he achieved after being appointed, aged only 33, to head the then federal government-owned Commonwealth Serum Laboratories in 1990.
At the time CSL was a run-down enterprise, with negative cash flows from its vaccines, no obvious path to a more prosperous future and a value assessed (probably optimistically) by Arthur Andersen at the time of about $23 million. McNamee transformed it by convincing the federal government to fund a new plasma products facility at Broadmeadows in Victoria and underwrite it with a 10-year contract for the output.
Four years later CSL was floated on the ASX in a privatisation that valued it at about $300 million and McNamee embarked on a string of modest acquisitions and ploughed funds into a broadening research and development program.
The defining moment in CSL’s modern history, however, came in 2000 when it acquired the Swiss Red Cross’s plasma fractionation business, one of the largest in the world at the time, for around $1 billion. That gave it entry to the US market and it followed up that deal with the acquisition of several plasma collection groups in the US.
In 2004 McNamee doubled up, acquiring the troubled Aventis Behring for almost as much and in the process rationalising the US industry, which had been plagued by over-capacity and sub-economic behaviour.
Had he pulled off the $3 billion acquisition of another US-based group, Talecris, in 2008, CSL would have dominated the industry (which is why the US competition policy regulators effectively killed the deal). As it is, within the plasma-derived products segment of the global biotherapy industry, CSL is one of the key players.
It isn’t just CSL’s transformation into a global business, however, that has made McNamee a sharemarket darling but the financial discipline that the group has demonstrated throughout his tenure. His acquisitions were cleverly constructed, conservatively financed and vastly value-accretive.
Today CSL has a market capitalisation of nearly $21 billion despite spending around $500 million a year on R&D and having returned the best part of $3 billion to shareholders – and it has no net debt. It also has a strong record of successfully developing new products and extending existing ones.
It is the combination of highly shareholder-accretive growth through both very strategic acquisitions and heavy investment in its existing activities that has characterised McNamee’s leadership. He has pursued a very consistent and disciplined – and successful – strategy for more than two decades.
It is no surprise that his successor comes from within CSL. Paul Perreault, currently president of CSL Behring and responsible for about 85 per cent of CSL’s revenues, has decades of varied experience within the sector and has held senior commercial and operational roles within CSL. While he will inherit a company in a tremendously strong condition next year, he is going to have to fill big shoes.