Say anything but just get the deal done

I WISH I'd had a copy of David Hough's new book, Boans For Service: The Story of a Department Store 1895 to 1985, in early October last year.

I would have then had the rule book of corporate takeover promises with which to provide a better assessment of the Commonwealth Bank's pledge to keep the jobs of BankWest staff after striking a deal to buy it off troubled HBOS.

That was the pledge the Commonwealth broke late last month when it axed 250 jobs it had promised weren't under threat.

While the circumstances of the 1984 takeover of listed Western Australian department store operator Boans may have been different than what happened at BankWest 24 years later, the underlying issue regarding promise keeping is strikingly similar.

Mr Hough was paid by the Boans family to write the book, which is being launched this week. I was provided with a preview copy but, not feeling as nostalgic as many others readers might, I have focused much of my attention on the takeover period, partly at the author's suggestion.

In his book Mr Hough devotes a chapter to this, which effectively was the death knell of the Boans name in WA retail.

For those who don't recall, Boans was the locally owned department store operator that had become the dominant player in Perth. It had seen off David Jones, which actually quit Perth in 1978, and was bigger than Aherns, another local player, which was ultimately bought by DJs to facilitate its return to the WA market two decades later.

As an aside, it is fascinating to see the vast divergence in retailing figures that can occur due to mismanagement. In 1978 at Garden City, in Booragoon, for instance, DJs was paying $2 per square foot of retail space (the period is not mentioned) and generating turnover of $24.32 per square foot. In a shop less than half the size in the same centre, Boans was paying $3.50/sq foot and getting revenue of $93.55/sq foot.

While profitability was not revealed in the book, the figures show the potential business case in retail - perhaps something investors ought to consider when they think about Wesfarmers' purchase of Coles.

But back to the takeover in 1984.

At the time, Boans was the subject of a bitter tussle between local retailing upstart Parry Corporation, run by 1980s WA entrepreneur Kevin Parry, and Myer Group, the east coast giant which had established a foothold in the state.

Parrys was offering paper at about $12 per share, Myer was offering cash at $10.75. While in hindsight it might be easy to see which was truly worth more, Parrys launched a media campaign targeting Boans' staff concerns about what might happen in the event of a Myer takeover.

While that tack was exploited heavily for its own purposes, it was not without foundation. Myer had previously taken over Grace Bros in NSW with assurances about jobs, only to subsequently engage in heavy cutbacks. Sound familiar?

Because of this - and possibly, in my view, because of the Parry Corp links to the Burke government of the time - the Boans takeover was political.

"Myer promised that if the merger was successful it would: maintain purchases from WA manufacturers; retain the Boans name, and extend it to the four existing Myer stores; continue to trade the two business separately in the short term; retain Jock Morrison as managing director," Mr Hough writes.

But the government took that further.

After a meeting with Myer executives, the state Labor government briefed the press on the issue, resulting in a page one Sunday Times headline - 'Myer pledge on takeover bid: BOANS JOBS SAFE'. According to Mr Hough's book this was a stretch from what Myer had committed to.

In briefing notes from the same meeting with the government, Myer said it had relayed its "intention was the best guarantee for staff". "However", it continued, "normal business practice meant the management must be free to look at all aspects of the business including stores."

Myer, of course, chose to stay silent on the government's release regarding job security.

So there we have it. A suitor making pledges and sounding like everything is safe when the fine print shows it isn't.

The case of Boans can't be properly compared with BankWest because, unlike the Commonwealth Bank, Myer never got a chance to break its so-called promise.

Instead, it was taken over itself in 1985 by GJ Coles & Co, what is now known as the major retailing arm of Wesfarmers.

Inevitably, the new takeover came with its own assurances.

"To Coles, the Boans name held no value nor had it any legal obligation to honour promises or agreements Myer might have made with respect to staffing and local suppliers," Mr Hough writes.

The Boans name disappeared and many staff lost their jobs, including most of the buyers.

It is a fascinating study in just how much store we can place in any corporate promise that is not part of a contractual obligation. That is not just for employers but also for governments.

It makes one wonder what would really have happened if BHP Billiton had secured Rio Tinto or, more importantly, how Rio will live up to promises made with regard to its deal with Chinalco.

It's a pity to say this but history is showing that corporate leaders will say anything to get the deal they want over the line, and worry about the consequences later.

n Extracts from Boans for Service © David Hough 2009, published by The Estate of FT Boan, distributed by Fremantle Press.