RICH PICKINGS: I'd like to thank the economy
With the mining boom coming to an end, there has been plenty of pain among Australia's super rich this year. But among the losers there have been shining lights too. The envelope please ...
A year that started with Gina Rinehart becoming the richest woman in the world will end with commodity prices under pressure and the golden mining sector glow that has lit the rich list for more than five years seemingly fading.
We’ll have to wait until next year until Forbes and the BRW publish their official rich lists to see exactly how much the total wealth has fallen, but expect Rinehart to shed billions and the coal barons – Chris Wallin, Sam Chong and of course Clive Palmer – to be hit hard as well.
The one saving grace has been the performance of the ASX – up around 12.3 per cent since the start of the year – which should mean at least some entrepreneurs will see their fortunes bounce back on next year’s list.
So who has enjoyed the best comeback and who has made the biggest mistakes? Let’s hand out our annual Rich Pickings awards. The envelope please…
Comeback of the year
At an age when most people are in the second or even third decade of their retirement, 89-year-old Len Ainsworth is enjoying something of a career renaissance.
While Ainsworth is best known as man who turned gaming machine maker Aristocrat Leisure from a back-street maker of dental equipment into the world’s second-largest pokie maker, the last decade of his life has been dedicated to building a second pokie company called Ainsworth Game Technology.
It’s been a slow and difficult process, fighting to break into the lucrative North American market and fighting against the might of his larger rivals – including, of course, Aristocrat. But in the past two years, Ainsworth’s perseverance has been rewarded with a firm foothold in America and strong profits.
The stock has increased a remarkable 400 per cent since the start of the year, which means the value of Ainsworth’s shareholding in the company – now up to $443 million – is now greater than the value of the stake he still holds in Aristocrat Leisure.
Ainsworth shows no signs of retiring or even slowing down any time soon. And more power to him.
Mistake of the year
It’s an affliction suffered by entrepreneurs big and small, rich and poor – an inability to properly value the company that you founded. Actually, the rich are usually pretty good at knowing when to sell out, but this year we saw one of the worst examples of holding on too long.
It was clear from last year that 2012 would be a difficult year for surfwear giant Billabong, which had already signalled store closures and hired former Target boss Launa Inman to conduct a review of operations.
So it was no surprise when Billabong received a $3.30 a share takeover offer. What was surprising was the reaction of founder, director and major shareholder Gordon Merchant, who declared he wouldn’t sell for less than $4.
TPG quickly walked away and within four months, Billabong’s position had deteriorated to the point it had to sack its chief executive, raise $225 million and totally restructure its operations. The shares fell to 96 cents.
TPG eventually lobbed another bid of $1.45 a share, which it then abandoned. Another private equity firm, Bain Capital, made a takeover bid and abandoned this after a matter of weeks. A Billabong executive, Paul Naude, then made a bid.
Merchant remains on the board. He shouldn’t.
Mess of the year
Rich list members Travers Duncan, John Kinghorn and Brian Flannery have found themselves involved in a NSW Independent Commission Against Corruption inquiry into whether a company called Cascade Coal was corruptly awarded a coal exploration licence in 2009 by former state government mining minister Ian Macdonald. Duncan, Flannery and Kinghorn are shareholders in Cascade along with the family of controversial Labor powerbroker and NSW state MP Eddie Obeid.
While there are no suggestions that Duncan, Kinghorn and Flannery have done anything wrong, the inquiry has exposed the strong and often complex ties that bound the three men and their inner circle of investors. The hearings continue and the mess could well get bigger in the New Year. It’s a safe bet that Duncan, Kinghorn and Flannery wish they had never heard the name Obeid.
Fall of the year
The mining boom has done strange things to the Australian economy and strange things to the rich list. It’s made Gina Rinehart soar way above former top dogs James Packer and Frank Lowy and it’s turned former electricians from Newcastle into billionaires.
Well, at least that’s what we thought until we saw the dramatic unravelling of the empire of Nathan Tinkler. It seems strange to think that the year actually started pretty well for Tinkler, with Whitehaven Coal buying his coal outfit Aston Resources and agreeing to pay top dollar for a privately-held coal company called Boardwalk Resources that he threw into the deal. Tinkler emerged from that deal with a fortune of around $1 billion and was seemingly sitting pretty.
But then he tried his good old trading-up trick, attempting to parlay his stake in Whitehaven into a $5.3 billion takeover of the business. The deal failed in August and it has been all downhill since.
While his only real wealth locked away in Whitehaven shares, Tinkler has struggled through a series of cashflow crises, including problems at his sporting clubs, his horse racing empire, his property development business and his investment arm. Most recently, they’ve taken his jet and helicopter.
Tinkler still has a $650 million stake in Whitehaven, but the question is: What debt does he owe against it? Most pundits suggest he owes more than the stake is worth. Whatever the case, Tinkler won’t be seen on a rich list for years to come.
Rich lister of the year
The Packer swagger is back – and for rich list watchers, it couldn’t be more exciting.
It’s been incredible year for James Packer who has emerged from something of a self-imposed media ban a different man – and not just because he’s lost enough kilos to swagger around Sydney like an Adonis.
Perhaps inspired by the highly successful portrayal of his father Kerry in the Nine Network’s hit mini-series Howzat!, James seemed to pick up on a few of his dad’s best traits.
The famous Packer family aggression and boldness first returned with Packer’s calculated campaign to attack and depose John Story, the chairman of Sydney casino operator Echo Entertainment.
We also saw the famous family thirst for a bargain, with stakes in Treasury Wines and TradeMe snapped up in lightening raids.
But James showed a willingness to break with Kerry’s traditions too.
He kissed the media sector a final goodbye by selling his stake in Consolidated Media Holdings to Kim Williams at News Limited for a personal payday of $1 billion, a sum that is likely to look like a pretty good price down the track.
And he dumped Kerry’s "never complain, never explain” mantra to give several expansive interviews and speeches about why building a second casino in Sydney's Barangaroo precinct would be a win for the city and Australia’s tourism sector.
It's probably no coincidence that the return of the Packer swagger has coincided with a solid increase in his fortunes; the value of his stake in Crown has jumped almost 30 per cent to $3.55 billion.
Whatever the reason, it’s always better to have a Packer on the prowl than not.
James Thomson is a former editor of BRW’s Rich 200 and the publisher of SmartCompany and LeadingCompany.