Deals that snowballed: 10 classic Aussie Rich Lister side bets that made them millions

James Thomson Editor

Deals that snowballed: 10 classic Rich Lister side bets that made them millions

Published 15 November 2013 07:40, Updated 15 November 2013 10:39

When you join the exclusive club that is the Rich 200, you can expect three groups to knock on your door: the Australian Taxation Office, charities and entrepreneurs looking for capital to fund their dream. While many Rich 200 members are famous for their laser-like focus on their own sector and their own business, most have an insatiable curiosity to keep looking for the next opportunity. Many of these side bets come to nothing. But in some cases, the little business ideas that Rich Listers support can blossom into assets worth millions of dollars and, in some very rare instances, become the most valuable part of their empire. Below you’ll find 10 examples of Rich 200 members who looked outside their main business and turned a spark of a business into a major asset. What unites these entrepreneurs is vision – and an ability to see how industries will change, or how economic cycles will take a business to a new level. It’s not easy to do, of course, but these Rich Listers show it pays to be always on the lookout for the next big thing.Perron’s deals build an empire

Perth billionaire Stan Perron still works three days a week despite turning 91 this year, and oversees an empire built on property, mining and cars. But it wasn’t always like this. The serial entrepreneur started his career with a series of ventures, including making handkerchief boxes, building an ice-skating rink, running a plumbing business and starting an earthmoving business. In 1961, he sold the earthmoving group to Thiess Brothers for $3 million and stayed on for a year as general manager.

As a parting gift, company chairman, Sir Leslie Thiess, gave Perron the rights to distribute Toyota vehicles in Western Australia. In post-war Australia, no one was interested in buying Japanese cars, let alone selling them, and even Perron tried to give away the business that had been gifted to him.

Perron sold 293 vehicles in his first year. Today, he sells more than 25,000 a year. The Toyota distributorship, which essentially entitles Perron to a cut of every Toyota sold in WA, has become a licence to print money in a state where mine sites are thick with Land Cruisers.

But it wasn’t Perron’s only brilliant deal. In 1959, a cash-strapped Lang Hancock – father of Gina Rinehart – came to Perron seeking £1000 to back the iron ore exploration joint venture Hancock had established with business partner Peter Wright.

Perron would only lend the pair £500, but for that he got a 15 per cent share of any future royalties from Hancock and Wright’s tenements in the Pilbara. It was later converted to a 15 per cent royalty from Rio Tinto’s Hamersley Iron division, which generates billions of dollars of sales each year. Not bad for a £500 investment.

Lachlan Murdoch saves realestate.com.au

Lachlan Murdoch and James Packer may never shake off the ghost of failed telco One.Tel, but their records as tech investors are impressive. Packer made almost $1 billion for Publishing & Broadcasting Limited shareholders via his investments in online classifieds groups SEEK and carsales.com, but it is Murdoch who deserves the biggest plaudits for his investment in REA, the company behind realestate.com.au.

It was back in 2000 when REA was running out of cash and facing collapse, just a year after floating on the ASX. It wanted $7 million from Murdoch, but he struck an even better deal, offering $2 million in cash and $8 million in contra advertising in exchange for a 44 per cent stake, which was later increased to 61 per cent.

Today, REA is the dominant force in Australia’s online real estate classifieds market, with a valuation of $5.35 billion. That $10 million investment Murdoch made – of which only $2 million was cash – is worth a staggering $3.2 billion, or a third of the new News Corp’s entire value.

Sean Howard’s Alan Bond moment

Kerry Packer was known as a master of business timing, with a sixth sense for knowing the right time to buy, sell and hold. But he didn’t always get it right.

In 1992, Sean Howard sold Packer a group of technology publications – including Australian Personal Computer magazine – to Packer for $7 million. But he asked Packer if he could retain one business, a little software outfit called Microtex. Packer agreed, selling the business back to Howard for $1.

Howard would go on to turn Microtex into OzEmail, one of Australia’s first real tech success stories. It was sold in 1999 to MCI WorldCom for an amazing $520 million, with Howard pocketing $120 million.

He wasn’t the only winner from the deal though. Lawyer and merchant banker Malcolm Turnbull had bought a 25 per cent stake in OzEmail in 1994, when the business was in financial trouble, having burned through much of its seed capital.

Turnbull’s stake cost him just $500,000 and he would end up walking away with between $40 million and $60 million from the eventual sale of OzEmail.

Kerry Stokes goes digging for gold

Earlier this year, BRW named one of our last media moguls, Kerry Stokes, its best Rich Lister of the past 30 years. Not only is his a true rags to riches story – he was adopted at birth, battled dyslexia and struggled with periods of homelessness growing up – but as one of only 18 entrepreneurs to feature on every Rich List, he has proven his resilience.

He’s also a master of timing. After starting his career selling TV antennas and developing shopping centres, Stokes entered the media sector in the late 1970s and developed a small but impressive group of companies during the 1980s, built around the Ten Network affiliates in Adelaide and Perth; he would sell these two assets to Westfield chief Frank Lowy in 1987 during an ill-fated media interlude that would cost Lowy $1 billion.

In April 1989, Stokes emerged with an investment in a very different industry. The imploding empire of Alan Bond included a company called Wigmores, which owned the rights to sell Caterpillar heavy equipment in Western Australia for 60 years. As Bond started to sink, Caterpillar announced it was shifting the rights to a US company called Morgan Equipment; Stokes took a stake in Morgan before eventually buying the franchise outright.

It turned out to be a masterstroke. The business, which became WesTrac, would go on to pick up the franchises for NSW and China’s northern provinces. And, as the mining boom took off, so did its value.

In 2010, Stokes merged it with his Seven Group in a controversial $3 billion deal.

Allan Myers brews a foreign fortune

Melbourne lawyer Allan Myers is known as one of Australia’s top commercial silks, a reputation built over decades working as a QC. But his Rich 200 fortune isn’t based on big fees. Instead, it’s built on a brilliant investment in far-flung Poland.

Myers and his business associates, most prominently fellow Rich 200 member John Higgins, invested in two Polish breweries, Elbrewery Co and Hevelius Co in 1990, taking 51 per cent of each for about $US4.8 million.

Both businesses, which were merged into the Grupa Zywiec vehicle through a deal with Dutch brewer Heineken in 1998, thrived under private ownership, winning market share in a country where beer consumption doubled in a decade.

Myers continues to serve as deputy chair of the supervisory board at Grupa Zywiec, which sits separately from the company’s management, a common structure in European corporate governance. Shares in the company have fallen about 10 per cent in the past 12 months, but Myers’s stake in the business is valued at a conservative $200 million.

Lightning strikes twice for Craig Winkler

Craig Winkler was never that keen on selling MYOB, the accounting software group he founded in 1991 and built into one of the biggest technology groups in Australia. But in 2009, nine years after listing the company on the ASX, Winkler was given no choice when Manhattan Software Bidco launched a $450 million hostile takeover.

Winkler walked away with about $110 million, but he would be proved right – Manhattan sold MYOB to private equity group Bain Capital in 2011 for $1.2 billion.

Winkler can console himself with the fact that he has managed to enjoy some of the growth of the wider accounting software sector. Shortly after MYOB’s takeover in 2009, he invested about $15 million in a New Zealand group called Xero. It would emerge as MYOB’s big challenger, and for one big reason – where MYOB was still selling computer discs to SMEs, Xero’s services were based in the cloud and could be managed, updated and run by anyone with a credit card and an internet connection.

The growth of Xero, which listed on the New Zealand stock exchange in 2007 (and now has a listing on the ASX), has been amazing. In the past 12 months alone, the value of Winkler’s slightly enlarged stake (he reinvested in a 2012 capital raising) has grown almost sevenfold to an astonishing $632 million.

Interestingly, Winkler holds the Xero shares in trust for his charitable organisation, the Yajilarra Trust, which has helped fund studies into indigenous health, and has donated money to the Bible Society for the provision of Bible readings to indigenous children via mobile phones.

Creasy gets Sirius

Mark Creasy is Australia’s biggest mining prospector, and if you want proof, you’ll find it in the Guinness Book of World Records.

The British-born mining engineer, who moved to Australia, made the record books after pocketing $130 million in 1994 for selling two West Australian gold deposits, the biggest ever payout to a humble prospector.

But it is nickel and copper that could provide the next big pay day for him.

Creasy regularly sells tenements he discovers to small mining companies in exchange for a stake, and so it was that he swapped a 70 per cent stake in a project known as Fraser Range for a 20.3 per cent stake in a small miner called Sirius Resources.

In June 2012, that stake was worth $10 million. Even after Sirius shares shot up to nearly $5 in March and subsequently retreated to about $2.50 in early November, that stake was worth $115 million.

The reason is a series of discoveries at Fraser Range that suggest the project is supporting a mine of some size. Creasy retains a 30 per cent stake in the Fraser Range tenements and, based on the value of Sirius, this could be worth as much as $170 million.

Bob and Jack Ingham back the right horse

Walter Ingham, the father of iconic chicken farmers Bob and his late brother Jack, probably had little idea of the empire to come when he started his small chicken farm in 1918 with just one cockerel and six hens. But when Walter died in 1953, he left his sons a much more substantial operation – a 17-hectare chicken farm that had been built through the Depression and war years.

Over the next 60 years, Bob and Jack would transform that farm into Australia’s biggest chicken producer, which today sells one in three chickens in Australia and generates annual revenue of $2.2 billion. In March, Bob sold the business for $880 million.

But the seed of a chicken empire wasn’t the only thing Walter left his boys. He also gifted them a horse called Valiant Rose, a broodmare descended from a champion English racehorse and who would become the cornerstone of the Ingham brothers’ famous Woodlands Stud.

The breeding and racing operation became the most powerful in Australia, with its famous cerise colours dominating racetracks throughout the 1980s and 1990s. But in 2008, Bob sold the thoroughbred business to Dubai’s ruler Sheik Mohammed bin Rashid al-Maktoum’s Darley Stud for a spectacular $500 million.

Paul Fudge goes from rags to riches

The Rich 200 is full of rag traders made good, but the story of Paul Fudge is unique. Fudge’s first career was as a trader in high-quality fabric, but it was during his travels around the world in the late 1990s that he saw the rise of the coal seam gas sector in the United States and wondered whether Australia might spawn a similar industry.

Fudge assembled a team of Australian and North American experts and started pegging CSG tenements in Queensland and later NSW. It would take 10 years for his pioneering vision to pay off. In February 2006, when coal seam gas was still an unknown quantity, Pangaea sold a number of assets to Origin Energy for $70 million, although most of this windfall was reinvested in the business.

Three years later, Pangaea would sell exploration permit ATP 788P, which is located in the Surat Basin in Queensland, to Origin for a whopping $660 million, catapulting Fudge onto the Rich 200. He faded from view almost as quickly as he appeared, although he did re-emerge in early 2013 when his private company Belbay Investments bought a 9.9 per cent stake in mining services business AJ Lucas for about $32 million.

Bruce Gordon gets a bargain from Murdoch

It’s 1979 and Bruce Gordon, the former stage magician, is set to do a deal with old mate Rupert Murdoch. The pair had met during Gordon’s time promoting the Tivoli in Adelaide and Murdoch had even offered Gordon a job in 1958. But Gordon decided to take a role at Lucille Ball’s production company Desilu. When Ball’s company was bought by entertainment giant Paramount, Gordon would eventually rise to the position of head of international TV sales, a role he would hold for 23 years until 1997. Paramount might have been Gordon’s focus in 1979, but it was his small stake in Ten Network that Murdoch wanted. The pair reached a deal – Gordon would sell his Ten stake to Murdoch in exchange for the chance to buy Murdoch’s Wollongong television station, WIN.

It has been suggested Gordon spent about $10 million on the deal, including what he paid in 1991, to buy out minority shareholders.

Upon his retirement from Paramount, Gordon poured himself into expanding WIN, buying other regional TV stations and adding radio and pay TV arms.

Today, WIN is valued at more than $1 billion and Gordon’s total fortune – including an extensive property portfolio – is put at $1.4 billion