As 2009 draws to a close, it’s time for our annual awards celebrating the best and worst in the world of the wealthy.
Best debut
It’s impossible to go past the story of Paul Fudge, the former fabric trader who made $660 million in one day after utilities giant Origin Energy bought a coal-seam gas exploration permit from Fudge’s company, Pangaea.
Fudge, who is seen as something of an outsider in the mining world, perfectly timed the sale of his ATP 788P exploration permit, which is located in the Surat Basin in Queensland, with the sudden explosion of interest in Australia’s coal seam gas sector. Origin hopes the coal-seam gas reserves will help feed a $35 billion liquefied natural gas project it is developing in a joint venture with US energy giant ConocoPhillips.
Fudge got into the industry on the suggestion of a friend and assembled a team of Australian and North American experts to help him find assets. The sale was Fudge’s second big deal with Origin. In February 2006, when coal-seam gas was still an unknown quantity, Pagnaea sold a number of assets to Origin Energy for $70 million, although most of this windfall was reinvested in the business.
Biggest collapse
Matthew Perrin, former Billabong chief executive and serial entrepreneur, was one of the biggest casualties of the GFC.
In 2008, Perrin was valued at $150 million. In the end, all he had left was $30,000 in cash, a $200 watch, $3,000 worth of clothes, a Mercedes and a list of creditors a mile long. Those chasing debts included his wife Nicole, who was owed $4.532 million, and a slew of big bookmakers, who were owed a combined $1.62 million.
Perrin invested much of the proceeds from the sale of his stake in Billabong in an ill-fated Chinese supermarket venture. The business must have simply sucked up money – even as late as September 2008 he was reported to have pocketed around $50 million from the sale of his stake in software company RuleBurst.
Biggest deal
The Oracle of Omaha, Warren Buffet, likes to be greedy when others are fearful, so we should not be surprised that he was behind the biggest deal of the year – a $US44 billion deal to acquire North American railroad company, Burlington Northern.
Buffett, who described the acquisition as an “all-in wager on the economic future of the United States”, has spoken about the specific outlook for the rail industry as a driver of the deal, but analysts also believe Buffett wants to increase his exposure to the energy sector. Burlington is a major carrier of coal in the United States, and several energy companies owned by Berkshire Hathaway are major customers of Burlington.
In some ways, the reasons are not important – the bet should be seen as a sign of Buffett’s confidence in a great US comeback.
Ugliest spat
James Packer and David Leckie made a late bid for this title with a very public slanging match at the birthday part of Foxtel stalwart Sam Chisholm in October, but the award has to go to the battle between rich list members John B Fairfax and Ron Walker over the chairmanship of the Fairfax Media board.
The notoriously media shy Fairfax family reacted angrily to suggestions from Walker that he would remain in the chair until 2010, releasing a letter stating the family could “see no sound case to support the continuance of Mr Walker’s directorship or chairmanship for another year, particularly in the context of rapid industry change”.
In the end, the Fairfax family prevailed, with Walker replaced by former Woolworths chief executive Roger Corbett, who has set about restoring peace and trying to rebuild the company’s fractured revenue base.
Best comeback
Gerry Harvey (whose stake in Harvey Norman has more than doubled since the market bottomed in March) was a candidate here, as was Andrew Forrest (his stake in Fortescue Metals has doubled since June 1) but we’ve decided to go with James Packer for this award.
Packer’s wealth slumped from $6.1 billion to $3 billion between June 2008 and June 2009, leading to stories (including Paul Barry’s biography) about his mental state, his asset sales and his dud investments in the casino industry.
Yet Packer’s year turned around sharply in the second half. A battle for control of Consolidated Media pushed the value of his stake in that company up by more than 60% since the middle of the year, while Crown shares are up 55% over the last 12 months. The value of his stake in Challenger Financial Services has almost doubled to $510 million since June.
Packer looms as the billionaire to watch next year. He’s relatively cashed up and a major deal – probably in the gambling side of the empire – might well be just around the corner. Which all goes to show that you can’t keep the Packer family down for long.
Worst fall
Two years ago, Terry Peabody was Australia’s golden garbo. A string of acquisitions has made his waste management company Transpacific Industries a sharemarket darling, and propelled Peabody into the billionaire club with a fortune of $1.4 billion.
But when the GFC struck, Transpacific’s massive $2.1 billion debt load started to weigh on the company. When its shares plunged, the company was forced to look for an investor willing to get Transpacific back on its feet.
After four months of negotiations, Peabody managed to get US private equity firm Warburg Pincus to invest $800 million for a stake of around 18%. But Peabody’s tight control of Transpacific was, to some extent, broken.
His personal stake in the company was diluted from 38% to 19%. A Warburg Pincus director was appointed to the board, and Peabody was forced to agree that he would get the private equity firm’s approval “prior to undertaking certain actions” such as asset acquisitions and sales, equity raisings or share buy-backs.
Peabody’s stake in Transpacific is now worth just $135 million. The golden garbo has lost his gloss.
Rich entrepreneur of the year
Clive Palmer might have provided one of the most colourful entrepreneurial stories of the year with his assent to the position of Australia’s richest person, but we’re looking a little outside the square for this year’s winner.
Paul Little, chief executive of Toll Holdings, has come through the downturn with his reputation as one of Australia’s best chief executives greatly enhanced, while for investors who follow our wealthiest entrepreneurs he is a solid gold star.
While the GFC ripped through many of the fortunes of those on the list, Toll’s share price barely missed a beat, dipping only briefly below $5 in February this year before jumping to almost $8.40 in December. That’s lifted the value of Little’s stake to around $315 million, which takes his total fortune up towards $900 million.
Toll has continued with its familiar strategy of acquisitions throughout the downturn and produced a 14% improvement in operating profit in 2008-09, despite the collapse in global trade and domestic downturn.
If Little can keep growing Toll – and his record would suggest he can – he may find himself in the billionaire club within years.
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.
