It might be little more than a historic footnote in corporate Western Australia, but the delisting and privatisation of Avatar Industries Ltd marks the end of an era.
It might be little more than a historic footnote in corporate Western Australia, but the delisting and privatisation of Avatar Industries Ltd marks the end of an era.
By the end of the month, minority shareholders in Avatar should receive a cheque for their slice of a $57.8 million capital return as well as a pro-rata holding in Avatar spin-off, Lednium Ltd.
Avatar itself will remain a private cash box owned 75 per cent by chairman Ian Trahar and 25 per cent by managing director Paul Favretto, holding around $90 million, as well as contingent liabilities and assets from various transactions taken place recently.
That includes the sale of drilling subsidiary DrillCorp Ltd to Boart Longyear Ltd in August last year for $134 million, a profit of more than $100 million.
Those who followed Avatar closely will remember some difficult times, when the share price plunged during 2001 to 2003, a time when minerals exploration was less than attractive.
Mr Favretto said despite the difficult climate around the turn of the century, DrillCorp actually held its own, providing a valuable cash flow for its parent in the resources equivalent of a drought.
Last year, with Boart Longyear looking to float, it made an unsolicited approach to acquire the drilling business, which by then was generating handsome returns for Avatar.
“In the end it turned out to be a stunning investment,” Mr Favretto said.
“Everybody was universally happy, particularly for a company that had a chequered history.”
Mr Favretto and Mr Trahar have both been on the board of Avatar since 1993, around the time the company emerged from the wreckage of the Barrack House Group, where it had been Barrack Industries Ltd. They ended up owning 60 per cent of the company.
Mr Favretto said the sale of DrillCorp had left the company without a major asset, but with too many complications to simply wind up in an official sense.
Its two small holdings, Lednium and Arlec, were inconsequential in comparison to DrillCorp and represented very different investments. Lednium is a speculative technology play while consumer products group Arlec had long since ceased to have growth potential.
Mr Trahar is purchasing the Arlec business from Avatar for about $14 million, while the existing shareholder base of Avatar will be matched in Lednium, a manufacturer of high-powered LED illumination, which plans to be listed next year.
Mr Favretto said he and Mr Trahar could not really see the point of continuing on with the listed entity, especially when the climate at the time of the decision meant private equity was bidding up prices and making investment opportunities hard to find.
“It is unusual for boards and management of public companies to wind up rather than roll the dice again,” he said.
“Rather than making decisions for other people we decided to give it back.”
Sydney-based Mr Favretto said the pair was looking at opportunities but was not in a hurry.
“I’m quite happy, and so is Ian, to be quite cashed up for the moment,” he said.
“We’re learning from the DrillCorp experience, getting some new investments started where leverage is great.
“We’ll take a bit of time to assess the landscape, waiting for clarification on where the cycle is going.
“We are not packing up our saddlebags and riding into the sunset.”
