05/12/2016 - 14:21

Families seek opportunities with big partners

05/12/2016 - 14:21

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SPECIAL REPORT: Private sales during the past year have reduced the already small number of long-running family businesses in WA.

Families seek opportunities with big partners
COMPLEMENTARY: BGC director Sam Buckeridge (left) with DIAB co-founder Anne Payne and chief executive Glen Payne.

Private sales during the past year have reduced the already small number of long-running family businesses in WA.

Many of Western Australia’s iconic business names have disappeared over the years.

Once-prominent retailers such as Boans and Aherns have been acquired by bigger national businesses.

In other cases, such as Bunnings and Clough, the name lives on but the families that established the businesses are no longer involved.

The reason families sell businesses are endlessly varied, but there are two common themes: it can be increasingly difficult to accommodate the needs of all family members as the number of owners increases; and large national or international companies can often achieve more commercial success than a privately owned business on its own.

Long-running Perth companies Kailis Bros and Sealanes highlighted the latter when they announced sale deals this year.

Sealanes traces its origins back to Italian migrant Antonio Vergona, who arrived in Fremantle in 1895 and opened the Roma Fruit Palace in 1912.

For the past decade, Antonio’s great-granddaughter, Leeanda Paino, has led the business, which struck a deal with private equity backed group Superior Food Services.

Sealanes has a large-scale operation in Western Australia and we see this combination as the cornerstone to building the premier food service distribution business in Australia,” the company said.

It was a similar story for Kailis Bros, which traced its origins back to 1926 when George Peter Kailis opened a fish shop in Barrick Street.

His grandchildren, including managing director Matthew Kailis, have sold 90 per cent of the business to Chinese group Legend Holdings.

Under the deal, Kailis Bros’ seafood processing, wholesaling and exporting business has formed the platform for a larger venture called KB Foods.

Rottnest Express does not have the longevity of these businesses but it was a similar theme when the current owners hooked up with private equity backed Experience Australia Group.

Scott Bailey, whose family bought the Rottnest Express business in 2007, sees the new ownership as the start of something much bigger.

“We’d like to grow the business,” Mr Bailey told Business News.

“You need the balance sheet so you can fulfil your growth aspirations.”

Another notable private business sale this year was Geraldton-based DIAB Engineering, which employs up to 500 people.

The business was established in 1970 and is led by chief executive Glen Payne, whose parents were co-founders.

This deal was a little different because the buyer, BGC Contracting, is also a family owned business.

This was a significant factor in the deal coming together.

“I think it is safe to say we hit it off from the start and there were obvious synergies in both companies’ values,” Mr Payne said.

Similarly, BGC Contracting chief executive Greg Heylen added that there was a strong cultural and commercial fit between the two companies.

BGC isn’t the only family business on the acquisition trail.

Transport and logistics company Centurion is part of the Caradaci family’s CFC Group.

It struck a deal last month to buy the heavy haulage trailing fleet of embattled, listed company McAleese.

Centurion chief executive Justin Cardaci said his family-owned business had more than 45 years’ experience in the transport and logistics arena, and the capability to run a successful national business.

“McAleese heavy haulage was once a highly successful business in its own right and we believe once we have transitioned these assets to Centurion there is plenty of scope to re-establish this success,” Mr Cardaci told Business News.

The McAleese experience shows that listing on the stock market is by no means a guarantee of success.

Similarly, livestock exporter Wellard is a long-running business that has been wracked by problems since it listed a year ago.

The listing process diluted the Balzarini family’s stake to 36 per cent, and it has since fallen to 20 per cent after chief executive Mauro Balzarini completed a refinancing.

The Miocevich family has enjoyed a much smoother start to life in a listed company, after its engineering business, VEEM, completed a $25 million IPO.

The family still controls Veem via its board seats and 61 per cent shareholding, though history shows that family influence almost invariable fades as listed companies raise more capital and bring in independent directors.

Veem chairman Brad Miocevich told Business News his family had evaluated all options for the business, after he and his brothers decided they would not pass the operation on to the third generation.

He believes family companies that transition to public markets perform much better.

“I think it’s because there is a greater degree of scrutiny and discipline that comes from the requirements of ASX listing and public money,” Mr Miocevich said.

Veem’s success as a family business, since being established in 1968, led to it being inducted into Family Business Australia’s hall of fame last month.

Two other businesses with a longer history were also inducted.

Subiaco-based Hiddlestone Electrics has been operating since 1920, while fertiliser supplier Baileys has been around since 1926.

They are in rare company.

Business News’s listing of WA business dynasties (see page 22) has fewer than 20 companies that have maintained family ownership and control into their third generation.

Top of the list is the state’s oldest company, Lionel Samson Sadleirs, which goes back to 1829 and now has sixth generation family members on its board – but with an independent chairman and a professional chief executive.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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