Coles Myer, Baillieu, Macquarie

1. The fast-shrinking profits of the great Myer sale

By Stephen Mayne, currently $79 in front on his 50 Coles Myer shares

When retailing giant Coles Myer announced the sale of its troublesome Myer department story division to Newbridge Capital for a stunning $1.4 billion in March, chairman Rick Allert told the ABC that shareholders would enjoy a profit of "more than $700 million”. The Coles Myer share price immediately jumped 52c to $10.49, partly because Allert also said there were no meaningful contingent liabilities retained by the company.

By June, when the sale of Myer was complete, the profit had dropped to an estimated $600 million, with the final result to be announced with the accounts in October. There was no explanation regarding the disappearing $100 million.

Now Crikey hears that the final Myer net profit might finish up being as little as $500 million.

We now know that Coles Myer must carry liabilities of about $170 million for the next two years, largely due to guarantees to landlords relating to Myer tenancies. These may end up being meaningless unless Newbridge defaults on leases by closing underperforming stores.

However, we always knew that property landlords, especially Frank Lowy's Westfield, can prove hard work. As part of the argy bargy over the settlement, Westfield has forced Myer to accept the arrival of bitter enemy David Jones at a number of their centres, including our local Doncaster Westfield in Melbourne's eastern suburbs, right in the height of Kevin Andrews' safe seat of Menzies.

It really should be explained whether Coles Myer has effectively cut the Myer sale price because Westfield has reduced the value of the Myer business by negotiating a huge leg-up for David Jones.

Most retail analysts reckon Newbridge committed to pay too much – but now it might not be quite so much. This situation throws up some remarkable similarities with that other Melbourne icon, Foster's, which floated its pubs and pokies business ALH in 2003-04.

Then CEO Tee Kunkel gloated to the market on October 30 2003 that the final ALH float price of $2.50 a shares would generate gross proceeds for the company of about $1.5 billion and profits of more than $700 million. When the half year result on 10 February, 2004, was announced, shareholders found out the net proceeds would only $1.29 billion, largely because Macquarie Bank helped themselves to well over $100 million. No wonder the board announced Ted's early retirement the day before this result.

Coles Myer's new five-year plan will be unveiled in August when analysts, journalists and shareholders will be dazzled by an all-singing, all-dancing presentation. It will be designed to excite the market, by which time they may no longer notice that Coles Myer only profited from the Myer sale to the tune of the Melbourne CBD real estate – about $500 million.

Oh dear.




6. The Ted Baillieu dirt file: here we go again

By Stephen Mayne

First we had Mark Latham alleging that the Federal Liberal Party was misusing taxpayer resources by assembling dirt files on him and other Labor MPs. Now the tables have turned and the Victorian Libs are making hay out of the stolen diary of Bracks staffer Tom Cargill by claiming the Bracks Government has been unfairly digging the dirt on the family of new leader Ted Baillieu.

Baillieu finally came out publicly yesterday on the highest rating TV news night of the week to speak of his disappointment about Labor's tactics. The Age put the story on the front page today, summarising the allegation thus:

Mr Baillieu yesterday said he was "disappointed but perhaps not surprised" to learn that a key strategist in Premier Steve Bracks' private office had planned to conduct company searches of his wife Robyn and their three children, Martha, 16, Eleanor, 12, and Robert, 8.

Now come on. Company searches are public information. It's no different from looking someone up in the phone book or on the electoral roll. Besides, doing such searches is entirely reasonable in the context of the way Ted Baillieu's great mate, Jeff Kennett, handled his share portfolio and the fact that Baillieu is the richest man in the Victorian Parliament with declared equity holdings worth $3.8 million.

My whole whistleblowing job on Four Corners about Kennett in 1997 was over the fact that he used his position to gain large allocations of shares in hot floats and then placed them in his wife's name to avoid disclosing them to Parliament. The Kennett children were also used as a dumping ground for various sensitive Kennett family shareholdings. Given this history, why the hell isn't Labor entitled to go searching? If there is nothing untoward, nothing will be found.

If Labor wants to turn this back on the Liberals it should also latch onto the following: when working for Kennett in 1993, I read a dossier put together by Louise Asher, Ted Baillieu's current deputy, on the current Labor Treasurer John Brumby, who had only recently joined the Legislative Council after losing his seat in the 1993 federal election.

The Kennett staffer who took more interest in dirt digging than anyone else, Rebecca Cooper, was impressed with Asher's work as she did various title searches, estimated that he bought his first home without taking out a mortgage and made numerous observations about his wife, children and family background.

None of this was ever made public, which is the key point – you can only judge political attacks by what the politicians actually say or deliberately place into the media. Kennett's office probing into Brumby's personal financial and family affairs through rising backbencher Louise Asher was no big deal, just as doing company searches on the Baillieu family is neither here nor there until some sort of allegation is made.




23. How Macquarie sweats its assets

By Stephen Mayne, candidate for the Macquarie Bank board

The media had some fun over the weekend pointing out the Millionaire Factory was now literally making money out of thin air after Macquarie Capital led a consortium that bought the world's biggest tyre inflation equipment vending company, ASI Holding Corp, for $570 million.

Yes, yes, Macquarie charges every fee in the book on every asset in the book and is now the world's biggest non-government owner of infrastructure.

Crikey recently revealed that Graeme Barclay, the Macquarie Bank-appointed CEO of Broadcast Australia, loves to use the expression "sweating the assets", but never did we realise that Macquarie Communications Infrastructure Group, which owns BA and controls all the towers which keep the ABC and SBS on the air, seems to take this literally.

In summer, have a look at the Broadcast Australia network operations centre at Gore Hill, where the ABC used to be based nationally. On really hot days there is a BA employee hosing down the wall of the operations centre that faces the sun to cool it down: there's now so much new digital and radio (eg Nova, FBi etc) transmission kit inside the old transmission building designed for analogue kit that the air-conditioning system can't cope.

Surely Mr Barclay isn't so tight that spending $100,000 installing proper cooling systems is more sensible than paying someone $100 a day literally to water the tower. What would the ABC think if they knew this? They do now and our prediction is that MCG will spend the money before next summer.

Copyright © 2024 The Mayne Report. All rights reserved

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