Talk to an entrepreneur during a downturn, and you’re likely to here a cliché repeated time and time again – in every recession you can always find plenty of opportunities to make a bundle. There’s a good reason for this sentiment. As discussed a few weeks ago, plenty of entrepreneurs made fortunes by starting, buying or expanding their companies during the recession of the early 1990s.
Yet picking the bargain hunters in this downturn is not so easy. Perhaps our wealthiest entrepreneurs are still waiting for the sharemarket and asset prices to hit the bottom, or perhaps they are still shell-shocked from seeing around 30% of their fortunes disappear in the space of 12 months.
But there are tentative signs that at least some rich business people are mobilising in search of a bargain or two.
Cardboard king Richard Pratt has kept a low profile since Visy was fined over its role in cartel behaviour with Amcor, partly because of poor health. But his private investment vehicle, Thorney Investments, continues to trade actively in the small and mid-cap markets.
Among the sales are some interesting buys – a 16 million-share parcel in payments company Customers Limited (worth around $1.6 million and taking Pratt’s stake to 6.5%) and one million-share parcel in robot maker XTEK (worth $200,000, taking his stake to 19.8%).
But Thorney’s biggest bet came in early February, when it agreed to inject $2.5 million into manufacturing company Gale Pacific, which makes shade cloth and other polymer products. Thorney is likely to hold around 33% of the company after the Gale rights issue is complete.
Queensland mining baron Clive Palmer may have pulled the float of his iron ore concern Resource Development International, but he is still making some hefty bets on the resources sector.
In January, he announced RDI will spend $46 million on an exploration program in the North West Shelf. A month earlier, Palmer’s private company Mineralogy spent $125 million to buy Canadian coal miner Waratah coal.
The New Zealand-based, Australian-born entrepreneur is the reclusive founder of camping goods retailer Kathmandu. In January, she spent about $3.6 million increasing her stake in New Zealand-based children’s clothing company Pumpkin Patch, which has been battered in recent months by falling consumer sales in key markets such as the US and Britain.
Symond has been one of the most active entrepreneurs during this downturn. He stitched up a deal to sell a chunk of Aussie Home Loans to Commonwealth Bank in the middle of last year, and then swooped on the wreck of Wizard Home Loans for $26 million – a great bargain, given GE paid around $400 million for Wizard in 2004.
Pal and Garry Tieck, the sons of the late Franklins Supermarket founder Norman Tieck, have quietly built a reputation as formidable investors and control a portfolio worth over $900 million – Paul looks after the investing side while Garry is in charge of property.
The pair are long-term investors and love buying when asset prices are depressed, so it was no surprise to see them pop up in January as the buyers of an office building at Martin Place in the Sydney CBD. The family paid $83 million, a discount of around 10%, according to analysts.
In mid January, ComputerShare founder Chris Morris took part in a $1.9 million rights issue for fledgling brewer Empire Beer Group. Morris, who also became chairman of the company, has been a long-time supporter of Empire, although we’re not sure if this is bargain hunting or a bit of fun.
Property developer Bob Ell hasn’t exactly bought a bargain, but the fact he is willing to push ahead with two property developments worth a total of $7 billion makes him a lot more adventurous than many in the property sector.
Ell’s plans to build major residential developments at Cobaki Lakes and Kings Forest on the north coast of NSW progressed to the community consultation phase in December, and are expected to hit the market at the end of 2009 or in early 2010.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
