01/03/2005 - 21:00

Tim Treadgold: Briefcase - Andrew Roberts’ right royal conundrum

01/03/2005 - 21:00


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Prince Charles and Andrew Roberts do not, on the surface, appear to have much in common.

Prince Charles and Andrew Roberts do not, on the surface, appear to have much in common. Look a bit deeper than the sallow complexion of the future king of England (oh, and of Australia), and the tanned health of young Andrew and you find a remarkable similarity.

In a word, it is parents. More specifically, it is aging parents.

Charles has his mum, also-known-as the Queen. Andrew has his dad, also known as the king (of Multiplex).

In both cases there is an argument to be run that the oldies, who have done a brilliant job in the past of (a) propping up the House of Windsor and (b) building the house of Multiplex, should realise that they are fast approaching their use-by dates.

Briefcase will not dwell on the future of Charlie's mum. It will, however, take a look at what's going on at Multiplex where a once placid surface has become decidedly stormy with institutional investors on the verge of calling for blood on the floor, and/or a head on a spike.

The problem is that Multiplex, one of Perth's great business success stories, has hit a speed bump or, in the words of one headline writer, kicked an own goal in the form of zero profit on the $1.2 billion Wembley stadium project in London.

More specifically, there is great angst over precisely who knew what and when the Wembley job became a zero-sum game, and if they knew earlier than a $120 million capital raising at $4.54 a share late last year why wasn't the market told?

To understand how angry the market is with Multiplex look at the share price. On February 2 some lucky punter paid $6.15 for his parcel of Multiplex shares only to watch them plunge to around $4.62 the last time Briefcase looked, a 24.8 per cent wipe-out in 16 trading days. Ouch.

If that isn't bad enough there are the institutional investors who supported the $5.45 share issue who are now 83 cents, or 15 per cent out of the money.

Briefcase is not privy to the inner workings of Multiplex – and that's one of the company's problems. Not that it ought to invite a cranky old scribbler into its inner sanctums, but that it ought to be a lot more open with the markets in telling them what's afoot.

And that goes to the heart of Multiplex, until last year an intensely private outfit run by a mercurial and brilliant builder in John Roberts. Over his 50 year career, John has revolutionised building in Australia. In fact, he became so good that he moved to Britain, took up residence in the Dorchester Hotel (a stone's throw from Charlies mum), and set about revolutionising British building by winning contracts hand-over-fist.

The chickens, as they say, are now coming home to roost. It's one thing winning a contract. It's quite different to make a profit. Just ask Clough about its BassGas project, or Leighton and the Perth rail tunnel.

Which all leads back to the central issue about parents. In the Multiplex case we have the curious situation of Andrew Roberts in Sydney explaining what went wrong in London, while in London, we have the unstoppable John Roberts chasing more and bigger contracts – with the  stock market now wondering whether the new contracts will have similar problems as Wembley.

There are five central issues to the Multiplex crisis – and a crisis it will become if not one already.

(a) Who knew what and when about the Wembley disaster?

(b) Why wasn't the stock market told earlier?

(c) What is the precise role of John Roberts, founder of the business but now a man answerable to outside investors?

(d) Who is really in charge, Andrew or John?

(e) Will Andrew have the strength to ask dad to move aside, or will John do it himself?

A POX on both your houses seems to be the stock market's reaction to the rather bizarre takeover situation that exists in the bid by Metcash Trading for Foodland, and the reason is not hard to find – nobody really understands what on earth is going on.

For starters, the terms of bid are ridiculously complex, in keeping with the archaic and opaque business practices consistently displayed by South African companies that try to do business in Australia (and invariably fail).

Then there is talk of Foodland mounting a counter bid on Metcash, with the near certainty of mutual value destruction as the two companies fight a bidding game in which only the shareholders lose.

On the market there has been one way traffic since Foodland hit a 12-month high of $25.06 on the day after Metcash lobbed its bizarre bid. When Briefcase last looked Foodland was trading at $23, and heading south having lost more than $1 since early February.

Metcash hit its own 12-month high of $3.09 on February 16, and is now down around $2.95 as nervous investors start to step back, or take a closer look at Metcash and its Foodland bid which is a mix of cash, Metcash shares, and a chance to receive a share in Foodland's New Zealand operations.

Valuing this strange mix is a very tricky affair with only the cash component appearing to have any consistency and, apart from that, who in Australia really wants to be a major shareholder in a pure New Zealand retailer?

Briefcase may be wrong but it reckons Metcash had better either put a pure cash bid on the table to clear the air, or watch its attempt to Australianise itself collapse into a discard bin called “failed South African investment attempts in Australia”.

“Make money and whole nations will conspire to call you a gentleman.” George Bernard Shaw.


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