Packer, casinos, Macquarie and Rich Listers

5. Just how good was Kerry's Crown Casino deal?

By Stephen Mayne

The AFR's Neil Chenoweth produced an interesting obituary on Kerry Packer which included the following line: "While Packer had successes after these three deals (privatising PBL, Valassis and buying back Nine) everything else appeared small change – until 1999, when he pulled off another huge coup, buying Crown Casino for two times earnings."

Now there's no doubt that Crown has been a good deal for PBL shareholders – but Lloyd Williams wasn't that stupid. Crown shareholders were issued with 15.1% of the company or 90 million new PBL shares which have soared in value from about $550 million on the day the takeover was announced to $1.53 billion this morning when the stock cracked $17.

In other words, Crown shareholders have almost tripled their money by swapping into PBL shares, so unlike Bondy and Channel Nine, they've enjoyed the upside. PBL also took on about $1.2 billion in Crown debt, which explains the takeover valuation of $1.82 billion in the explanatory memorandum that was sent to PBL and Crown shareholders.

Sure, Lloyd Williams splashed about $2.2 billion building what was then the world's biggest casino. But Crown shareholders who hung onto their PBL shares have recovered everything.

While PBL is today capitalised at $11.4 billion, it only claims to have net assets of $4.5 billion, something auditor SJ Ferguson from Ernst & Young claims is true and fair. With net debt of $1.74 billion, the Crown business is clearly valued by the market at more than $3 billion for PBL.

Crown is now rolled in with Burswood, but the combined operation produced EBITDA of $456 million in 2004-05, well up on the $110 million produced in 1997-98 when the Asian crisis savaged high roller earnings. That said, there's no way by any measure it can be said PBL bought Crown for two times earnings.

Packer's private company was also underwater on an 8% stake in Crown that it held at the time of the PBL takeover, although a beautifully timed sell-down of a much larger stake a year earlier had produced a profit of almost $200 million for ConsPress.

One intriguing question to consider is whether Packer personally made more money from investing in Crown than he lost betting at casinos over the years. The Crown profits now exceed $600 million, and Lloyd Williams once told me that he hated to think how much the Big Fella had dropped in the London casinos. Surely, it couldn't be more than $600 million!

If you include betting on foreign currencies and the races, there's a fair chance the Packer empire could be marginally behind – but by jingo, Kerry had a lot of fun along the way.

23. Pay the kid a decent salary

By Stephen Mayne, owner of 67 PBL shares

Now that his tight-fisted dad has moved on, it really is time for all his old mates on the PBL board to agree to pay James Packer a decent salary for his efforts as executive chairman. There isn't another owner-director of a major public company who does not receive a salary or board fees, so why should the Packer kid continue to miss out?

After a decade on the board, Poor James is still to receive any salary for his efforts, in stark contrast with other sons of founders like the Murdoch and Lowy kids. Even his $80,000 whack from chairing Seek is passed straight through to PBL, which might explain why he felt the need to join the Qantas board and actually pocket the $100,000-plus a year fee.

Old man Packer was one out of the box in refusing any salary from PBL, whilst his rival and friend Rupert Murdoch was pocketing up to $30 million a year from News Corp and Frank Lowy helped himself to more than $13 million from Westfield.

Even billionaire Gerry Harvey was paid $855,578 by Harvey Norman last year and Kerry Stokes collected $124,856 for being executive chairman of Seven in 2004-05, even though his 92 million shares are worth almost $800 million!

One option would be for James Packer to follow his father's lead and go non-executive. After all, he is currently the busiest director in the country as he works full-time for PBL, is joint-CEO of the private Consolidated Press Holdings, plus sits on the board of Qantas and Challenger, whilst also chairing Seek.

Given that the family has about $3 billion worth of net wealth to manage outside PBL, it would make sense for James to step back from the executive hot seat at PBL, especially considering he has an able CEO in John Alexander and new executives coming on board.

When assessing the Packer empire in the past, you needed to know whether someone was a MOJ (mate of James) or a MOK (mate of Kerry). The big question now is when some of the old MOKs will make way for a few more MOJs on the PBL board. Old stagers like Laurie Muir and Robert Whyte might be looking over their shoulders.

Kerry Packer is still listed on the PBL website as executive deputy chairman so it might yet take a bit of time for any other changes to come through. Besides, as executor of KP's estate, old MOK Lloyd Williams might have plenty of instructions to carry out from the grave on matters such as who sits on the PBL board.


24. Farewell Kerry, but who are the remaining business characters?

By Stephen Mayne

As a shareholder activist, people sometimes ask who have been the most interesting or colourful company bosses to come up against. Kerry Packer may have been the most intriguing interview talent that Michael Pascoe ever faced, but it was never quite like that at PBL AGMs because the big man never actually stood up to face the questions.

Sure, occasionally he would grab the microphone and lob some entertaining grenades and in October 2000 he gave me that precious quote which finished up on a Crikey mug: "Do you deliberately set out to be offensive or is it just natural?"

But truth be known, Kerry Packer was so shareholder unfriendly that in my experience he never even mingled with his shareholders over a cup of tea, let alone delivered a presentation.

Rupert Murdoch clearly out-performed him in this regard because he gives shareholder presentations, answers all the questions, has a separate press conference and then usually mingles with the shareholders after the meeting. Sadly, the death of Packer and the departure of News Corp to the USA means the Australian AGM scene has now lost its two most intriguing figures in the space of 15 months.

For sheer abuse and combativeness in response to AGM questions, neither Murdoch nor Packer get near Westfield boss Frank Lowy, but Frank never had the humour, charm or political savvy of his richer fellow billionaires.

So who are the fascinating owner-operators left at the top of Australian public companies? Here is a list of my four favourites, although the ranks are clearly thinning when you also consider that the likes of John Singleton and Solomon Lew have quit the last of their public company boards and Multiplex founder John Roberts was rolled as executive chairman last year.

Westfield: Lowy family has 11% and executive chairman Frank Lowy is as combative as they come
Harvey Norman: It's always a laugh with executive chairman and 30.5% shareholder Gerry Harvey, who said "That's the first time anyone has ever interrupted our AGM, I'll get you later" when I asked a question at the 2001 meeting.
PBL: Packer family has 37.4% but chairman James Packer is nowhere near as interesting as his late father. In fact, James was nauseatingly nice to everyone at the first Seek AGM in Melbourne last year.
Seven Network: Kerry Stokes has 43% and can be a little combative despite professing to welcome tough questions.

And now here's a list of the three most boring owner-operators who still chair their public companies:

Reece Australia: Executive chairman Alan Wilson has run the plumbing supplies business since 1974, but despite his family owning a $1 billion stake this operation reeks of boredom.
Rural Press: John B Fairfax and his family control 53.5% but the AGMs are held in Richmond, outside Sydney, and there's nothing too exciting about an old but boring Sydney establishment family running a large number of small newspapers.
Ramsay Health Care: Paul Ramsay has 42.7% and might be a wealthy mate of the PM's but his AGMs are never very exciting and his polite manner usually defuses any tension.

Sadly, this whole notion of professional directors and independent chairs is taking much of the colour and movement out of the AGM scene. There are more and more billionaires in Australia but fewer of them still manage public companies, let alone actually run the gauntlet of an AGM.

In this respect, I'll certainly miss Big Kerry who is the only chairman to have swiftly cut down the raving Jack Tilburn when he declared at the 2003 AGM, "I've got my opinion and you've got your opinion, and I've got more shares than you," which was quickly followed by "you're asking trivial questions and wasting everyone's time."

26. The totally Macquarie experience

By Stephen Mayne, proud owner of 12 Macquarie Bank shares

Andrew Loog Oldham, who managed The Rolling Stones until 1967, once famously said, "The Rolling Stones are more than just a group – they are a way of life."

Is Macquarie Bank managing director Allan Moss having similar delusions when he talks about people enjoying the "totally Macquarie experience" when they fly to Sydney? The comments came as Macquarie lavished $358 million on Smarte Carte, the world's biggest airport trolley and locker business, which has a monopoly over Australia's airports.

With Macquarie tipped to be one of the leading bidders for the AWAS aircraft leasing business, the day might yet arrive when you'll fly on a Macquarie plane, land at Macquarie's Sydney airport, use its airport trolley to reach your car and travel down its Eastern Distributor tollroad to visit one of their seven office towers in Sydney and North Sydney, which include the Citigroup Centre, Macquarie's head office at 1 Martin Place and the Allianz Centre. Check out the full list of office towers on page 16 of the Macquarie Office annual report.

I occasionally fly to Sydney and drop into the ABC head office at Ultimo which relies on transmission towers owned by Macquarie Communications Infrastructure Group to reach its vast audiences across the country.

If you feel like relaxing in Sydney, you can always pick up your boat from one of Macquarie Leisure's 1300 berths in NSW, or why not go bowling at one of the hundreds of bowling alleys they control in Sin City?

Similarly, one of your elderly relatives might be in one of the 14 retirement villages that Macquarie scooped up from The Salvos last year. Until the business was profitably sold in December 2003, you could even fly to Sydney to die and Macquarie would look after all your funeral and cremation needs as the biggest player in that market too.

Even if you plan to blow up the Sydney Harbour bridge, you could "ask Macquarie" which last year bought the world's biggest explosives company, Norway's Dyno-Nobel, and shifted its headquarters to Sydney ahead of a public float.

I'm flying to Sydney on February 9 for the Patrick Corp AGM and might even try to carry out this dream lifestyle for a few hours in the afternoon. Drop us a line at smayne@crikey.com.au with any suggestions for the itinerary. For instance, a visit to the ATO building in Newcastle would be part of this exhilarating experience.

27. More Queensland names for the CRW List

By Stephen Mayne

Queenslanders appear to be severely under-represented on both the BRW Rich List and our very own CRW (Crikey Revised Wealth) List, but today we've got three new names and we're hunting for more. The first is a no-brainer after a recent float but the other two may require some further examination to prove they're worth more than the $110 million cut-off.

The 2006 BRW Rich List will be out in May and we'll be fascinated to see how many of our 100-plus names they include this year. We'll be buffing and polishing our list over the next few months so send your suggestions to smayne@crikey.com.au.

Brett Pointon: the founder of Brisbane-based serviced apartments manager Oaks Hotels & Resorts has just raised $30 million in a public float but retained a controlling stake in a business which is capitalised at $180 million after the $1 shares quickly shot up to almost $1.40.

McGuire family: nothing to do with Eddie but they own a string of pubs in South East Queensland such as the Paddo and the Colmslie. A booming economy and poker machines have been good to the family which only ever scores limited media mentions such as the following in The Courier-Mail in 2000: "Earlier in the week a mad mob gathered at the Paddo for the annual McGuire family drinkathon which was, as usual, declared a 'what goes on tour stays on tour' adventure. Jim, Tom and Richard McGuire entertained the new Deputy Premier Terry Mackenroth, golfer Jack Newton, ex-Broncos Terry Matterson and Mark Hohn, along with Jane Deery."

Trevor Lee: owner of Australian Country Choice, a booming meat company based in South East Queensland. Again, Lee has a very low profile and apart from appearing on Ron Boswell's website, he did make it into The Courier-Mail way back in April 1999 after his fashion designer wife Keri Craig was dragged into a court dispute with Lee's former meat partner, Michael Brown. .

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