Corporate raiding

One of the most famous people in Australia for his corporate raiding is none other than Sir Ron Brierley. Corporate raiding is a form of takeover activity by the raider which is usually done in a hostile manner without consent. Brierley himself is a value investor, where he searches for value in companies ignored or forgotten by mainstream analysts. He believes that some companies are worth more dead than alive. This is the case when value is intertwined within the company, locked away because of poor management or unrecognised circumstances. He is a mischievous person who comes in, appoints himself to the board, gains the boards' majority and then breaks down companies to unleash its value. He was pretty unpopular in Australia doing that.

I'm sure every(or most) reader(s) of my blog in Melbourne, Australia knows about AGL, The Australian Gas & Light company. They deliver our gas and electricity bill every 3 months with an analysis of our consumption of electricity & gas over the past 3 months. Long, long ago in Australia AGL used to be a partnership, not a company. It also had partnership laws where each member was to hold only 2% of the company each. But, in fact, what is was doing was treating itself like a company. It issued its obligatory reports each quarter of the year with its results. However, it did not have to disclose any of the names of the partners by law.

Brierley saw hidden value in AGL. It had tremendous value in its holdings. A subsidiary of AGL with only 12% holding was worth the price the market was selling AGL for. That means by buying AGL, you are effectively receiving all the power stations, vast amounts of land and the entire company absolutely free. Brierley was ecstatic at such an opportunity, but he wondered how we could get around the 2% holding for each partner. Luckily for him, his talented partner in business, Gary Weiss, which was a law graduate, knew a way to get around this rule.

Brierley researched the company upside down and found out everything he had to know about the company. It was said at a certain point, that he knew absolutely more about the company than the managers of their own company actually did. The way around the bush Weiss had found out was to establish nominees in other names. The names were bizarre such as The Countess of Naples, Cessnock Flying School, Gary Sobers Indoor Cricket Centres from Gibraltar. They built up a position to own until 40% of AGL. They thought the government wouldn't find out about them.

Weeks later, the government decided to corporatise AGL, in other words, turning it into a company. All along, Brierley suspected AGL knew of their built-up position in the company. Weiss assured him that all was alright, and when Brierley sat next to the chairman of AGL at a formal dinner, he came back and told Weiss that the chairman hasn't the faintest idea of their position at AGL. So when the government announced their decision to corporatise, Brierley wondered what to do. On the day of the decision, the government of NSW found out about it. All hell broke loose, and suddenly it was a mess everywhere and everyone got involved. The government got involed, the premier of NSW got involved and the whole board was involved.

The premier was furious, saying to Brierley and Weiss that they had made the government look like mud. In the end, after much negotiation, they managed to broker a deal with the government with effectively allowed them to keep their shareholding. Up until 2003, Brierley was still on the board of AGL where they had made tremendous amounts of money. Such is the story of a corporate raider in a nation we all know too well as Australia.