ASX listing can impede creation of long-term wealth – Martin

Gordon Martin has built two major Western Australian companies without having to list on the Australian Securities Exchange, and he has no intention of changing that.

Mr Martin said it was often suggested that private companies such as Coogee Chemicals should list on the stock exchange to help with succession planning, get access to capital, and ensure market disciplines.

“I’m not sure about that,” he said.

“We have never been short of capital for the right project and it takes your focus away from long-term wealth creation to short-term share appreciation, and that can be absolutely destructive.”

Mr Martin said Coogee Chemicals would not have been able to proceed with some of its projects if it had to meet the short-term expectations of the stockmarket.

The company’s cyanide plant, for instance, took six years to develop, and Coogee is planning to expand one of its chlorine plants only after two years of negotiations over a sales contract.

“How as a small listed entity can you ever hope to maintain the excitement of the market?” he asked rhetorically.

Mr Martin’s oil and gas company, Coogee Resources, had planned to list on the ASX last year but cancelled the deal when institutions baulked at the asking price.

The company instead struck a deal with investment group Babcock & Brown, and Mr Martin is clearly pleased with the outcome (see page 14).

Mr Martin cited the example of listed scaffolding and formwork supplier PCH Group to illustrate some of the shortcomings of being a listed company.

Malaga-based PCH, which counted Mr Martin among its major shareholders, recently fell to a hostile takeover by UK company Cape Group plc.

Without mentioning PCH by name, Mr Martin said he had been involved with a scaffolding company that had a “terrific future” and the prospect of doubling or tripling profit in the next two to thee years.

“But for the board to come out and make that statement and run the risk that in two years’ time, if something untoward happened, they would suffer a class action or a legal issue with the shareholders, its intolerable,” he said.

In the absence of an ASX listing, Coogee Chemicals has used its partners and its sales contracts to help raise money for expansion projects.

For instance, it partnered with Wesfarmers and the former AIDC to build a sodium cyanide plant in 1988.

“We borrowed $7 million on the strength of the joint venture partners…and without that I’m not sure that our bank managers would ever have contemplated it,” he said,

Coogee also developed two chlorine plants in partnership with Nufarm in the late 1980s.

“We financed those without putting a dollar in, on the strength of the joint venture partner and the length of the (15-year sales) contract,” Mr Martin said.

“Those two plants have been fantastic; we have now moved to 100 per cent, and we are about to expand production to make one of those the largest chlorine plant in the world.”