Kerry Packer by Michael Stahl (i read books .txt) 📕

Newcastle Waters is where Kerry dispatched his son James to serve a year of jackarooing, after he had completed high school. It was a case of history repeating: when Kerry’s brother Clyde had asked his father about university, Sir Frank had replied, ‘You go to work for me. You’ll learn far more in the school of hard knocks.’

Kerry had had a similar response to the question of sending James to university. ‘Why would he want to go there? To learn how to smoke marijuana?’

In 2009, James Packer shocked the rural world by selling his family’s 90 per cent share of Consolidated Pastoral for $425 million to a British private equity firm. (Ken Warriner retained his 10 per cent). Two years later, a similar-sized sum relieved him of his 50 per cent share in the giant Teys Bros cattle feed, processing and tannery business, another of his father’s key acquisitions. But Ellerston Pastoral station is still owned and run by the Packer family.

Outback observers were sad to see the end of the Packer family’s involvement in the cattle industry they had helped to revolutionise. At the same time, they were dipping their Akubras: in the timing, and the prices he got, James had done a deal worthy of his old man.

4

THE DEALS

Kerry Packer was celebrated and slandered in equal measure for his ability to make boatloads of bucks. Whatever anyone said about the ‘stupid son’, the fact was that Packer parlayed a small fortune into Australia’s largest—and by a long chalk.

In 1999, satirical group The Chaser thoughtfully introduced on its website, a Packer Watch Calculator. One of Australia’s earliest such website devices, it enabled users to enter their annual salaries and see how long it would take Kerry Packer to earn it.

It was usually a matter of minutes. Journalist Alan Deans, writing in The Bulletin’s tribute issue to Packer on 4 January 2006, made a career calculation based on Packer’s bookend entries in the Business Review Weekly magazine’s annual Rich List. Packer was first listed in 1983, with a fortune of $100 million. His last entry in 2005, where he topped the list, was $6.9 billion.

That’s $846,824 per day, for 22 years. And some believe that the BRW Rich List, diligently compiled by journalists using the best information they can access, gives the greatest satisfaction to tycoons in seeing how much of their wealth they’ve kept out of it. Again according to BRW in 2005, Packer ranked number 94 of the 691 billionaires in the world.

Channel Nine was the undisputed leader in television by any measure. ACP Magazines had an unmatched family of consistent money-earning titles, top among them the perennial Australian Women’s Weekly. Along with all that came Consolidated Pastoral Company. Packer’s purchase of Newcastle Waters and nearby Humbert River stations was the beginning of a 5 million hectare rural empire, one of Australia’s largest and most innovative cattle exporters.

Inconveniently for Packer, his wealth didn’t arrive in the form of $5.9 million weekly pay slips. It came through effectively just a handful of high-profile deals—most of them hits, but with a few notable misses—that spoke volumes for Packer’s perception, persistence and flair for the art of doing business.

In 1983, Packer privatised Australian Consolidated Press in an audacious deal that, to begin with, exposed the little-known fact that the Packer family had actually owned only about one quarter of the shares in the company, this dating to a flurry of capital-raising in the dying days of Sir Frank. The rest was held by private and institutional investors.

KP’s motive to privatise, it seems, wasn’t purely Packer possessiveness. The timing was made perfect by a depressed share market and recent changes to the dividend-paying obligations of private companies.

Most pointedly, however, Packer sensed a change in the wind. The privatisation was part of a squirrelling strategy, in which he was locking down access to cash. On 17 December 1982, Packer told The Australian Financial Review: ‘I have thought we were heading into a depression for the past 18 months to two years … If the international banks do go broke and there’s a depression, not a recession, those merchant banks out there might not have the money. They are in a far weaker situation than I am. So I can afford to have my money locked up, and can afford to pay the extra 0.5 per cent interest.’

Through a masterful structuring of shares and offers of tax-free dividends, and more than a little one-on-one Packer persuasion, the big fella privatised his media empire for around $100 million, or less than half the $220 million at which the assets had been valued.

But there were bigger deals to come. ‘I want to live in Australia,’ Packer once said, ‘but you have to protect your organisation by going overseas and by being defensive when investing in Australia.’

In 1986, he spent US$365 million on purchasing a US company, Valassis, which printed colour advertising inserts for newspapers and magazines. Valassis was by far the dominant player in the market.

The Valassis story is unusual in Packer’s having remained fairly hands-off. He promoted an executive named David Brandon from within the Valassis ranks to CEO. Brandon helped increase sales by almost US$100 million in the first year, while also reducing the company’s costs. In 1992, Packer decided to start cashing in on the hugely successful company, selling 51 per cent of his shares for US$375 million; in other words, pocketing US$10 million while retaining almost half of the company.

The remaining 49 per cent, sold in 1997, reaped a heady US$500 million. Through the machinations of corporate structure, dividends and so forth, however, many have estimated Packer’s true Valassis harvest at somewhere between US$1–2 billion.

In the midst of that, in 1988 Packer spent a trifling $212 million to acquire most of the stable of magazines from familial rival Fairfax. These included the hugely successful Woman’s Day and