COVER

GLOBE-TROTTING AUSSIES

D’ARCY JENISH May 2 1988
COVER

GLOBE-TROTTING AUSSIES

D’ARCY JENISH May 2 1988

GLOBE-TROTTING AUSSIES

COVER

Australian press baron Rupert Murdoch learned the intricacies of the newspaper business early. His father, Sir Keith Murdoch, a noted First World War correspondent who organized Australia’s first beauty contest, eventually became managing director of what was then the country’s largest newspaper group, the Melbourne-based Herald and Weekly Times, Ltd.

And from the time he was 9, Rupert was taught both the editorial and business sides of newspapers from his father.

Now Murdoch owns a diversified and expanding global empire that includes newspapers, television stations, magazines, book publishers and a movie studio. His major holdings are scattered throughout Australia, Britain and the United States. And although he is now an American citizen, Murdoch was the first of a new generation of Australian businessmen who achieved immense success at home before becoming globegirdling entrepreneurs.

Among the empirebuilding Australian businessmen who have followed in Murdoch’s footsteps to become entrepreneurs on an international scale are Alan Bond, a high-school dropout whose Bond Corp. Holdings Ltd. operates breweries, mines, retail stores and media outlets; John Elliott, who has turned Elders IXL Ltd. into a major international brewer; and Robert Holmes à Court, who before the October stock market crash was Australia’s richest man, worth an estimated $900 million. John Milton-Smith, dean of the business faculty at the Royal Melbourne Institute of Technology, attributes their international success partly to the “fresh eyes of outsiders who see opportunities and profits where others may see risks and costs.” But Sydney stockbroker Tony Le Brun of Reynolds & Co. said, “There is a strong ego drive in all this, a desire to be king of Australia.”

Several of the would-be kings suffered major blows to their egos and their balance sheets as a result of last October’s

stock market crash. Because the Sydney Stock Exchange is heavily dominated by natural-resource stocks, it was among the hardest hit of all the world’s exchanges. As a result, the National Companies and Securities Commission ordered all publicly traded Australian

companies to submit postcrash financial statements by Feb. 19. They revealed that Bond Corp. had lost about $301 million on its investments while Holmes à

Court’s Bell Group Ltd. lost about $740 million. Murdoch’s personal losses have been set as high as $1.85 billion. And the value of all stocks traded on the exchange plummeted by an astronomical 42 per cent to $4.3 billion from .precrash values.

Chill: Trading on the Sydney Stock Exchange has slumped dramatically since the crash, which sent a chill through the Australian securities industry. The total daily value of shares traded slipped to $148.3 million

from $241 million precrash for the first quarter of 1988. As a result, the country’s brokerage firms, which number about 100, saw their average daily trading income drop to an estimated $22,240 from $47,261. New share issues fell to under $65 million in the first quarter of

1988 from $500 million during the first three months of 1987. The number of takeover bids jumped to 43 during the first seven weeks of this year from 23 in the same period of 1987. But the burst of takeover activity has not been sufficient to offset the slumps elsewhere, and an estimated 1,500 employees in the brokerage industry15 per cent of the total— have lost their jobs since last October.

Crash: However, the crash had little impact on the economy as a whole. The seasonally adjusted unemployment rate for February was 7.4 per cent, the lowest in six years (compared to 7.8 in Canada). Housing starts are expected to hit a four-year high of 137,000 in 1988 (127,090 in Canada), according to a Housing Industry Association survey. Capital spending

by business hit a record $5.8 billion in the final three months of 1987, an increase of 20 per cent over the previous three-month period, according to

the Australian Bureau of Statistics. Donald Stammer, chief economist with the brokerage firm Bain and Co., said that the crash greatly troubled people directly in the investment community but that it did not have a great impact on other sectors of the economy.

Loss: Still, some of Australia’s leading businessmen got caught in the midst of major deals just as the markets—and the values of their companies—came crashing down. Holmes à

Court, who once boasted that “big business is only small business with an extra zero on the end,” had acquired 12.3 per cent of Texaco Inc., the third-largest American oil company, last year. He sold his Texaco holdings at a loss of more than $255 million after the October crash. Holmes à Court also acquired about 30 per cent of Broken Hill Proprietary Co. Ltd., the largest conglomerate in Australia with iron, steel, gas and oil production. He subsequently sold $2.7 billion worth of his Broken Hill stock back to the company, reducing his interest to 10 per cent. Said broker Le Brun: “Certainly these guys are losing their status as folk heroes.”

Symbol: Meanwhile, beer barons Bond and Elliott are battling each other both at home and abroad. Bond, who won for Australia the 1983 America’s Cup, symbol of supremacy in international yacht racing, paid $1.5 billion last year for G. Heileman Brewing Co. of La Crosse, Wis., the fourth-largest beer maker in the United States.

At the time, he owned three major breweries,

Swan Brewery Co., Castlemaine Tooheys Ltd. and Pittsburgh Brewing Co. Bond also outbid 20 other companies last fall to buy 90 per cent of California-based St. Joe Gold Corp., the sixthlargest gold producer in the United States, for $635 million. Said Bond:

“In the shrinking and fast-changing world we live in today, successful companies must think of themselves as part of a global economy.”

Bond also owns seven per cent of British distiller Allied-Lyons PLC, beverage manufacturer Allied introduced

brewer and As a result, Castlemaine XXXX, one of Bond’s Australian brands, in the United Kingdom three years ago. Elliott’s Elders IXL, which is famous for Foster’s Lager and Paul Hogan’s television ad, acquired the British brewer Courage Ltd. for $3.2 billion in 1986, and promptly introduced Foster’s in the United Kingdom. Courage and Allied have since waged an intense battle for market share with their Foster’s and Castlemaine xxxx—and each claims to be winning. Courage has released figures from the British Market

Research Society showing Foster’s with 8.9 per cent of the draft lager market during a recent one-month study period compared to Castlemaine XXXX’s 6.7 per cent. Allied released figures from the same society showing Castlemaine XXXX had 4.8 per cent of the market during a one-year period from September, 1986, to September, 1987, compared to Foster’s 4.5 per cent.

Blunt: But Elliott’s battle for market share in the United Kingdom is just one part of an ambitious plan to make Foster’s the top-selling beer in

the world. In April, 1987, Elders bought Toronto-based Carling O’Keefe Ltd. for about $390 million. At the time, Carling O’Keefe held 23 per cent of the Canadian market. The brewer also owns the Quebec Nordiques of the NHL and the Canadian Football League’s Toronto Argonauts. The blunt-speaking Elliott wasted little time declaring his distaste for Canadian provincial regulations stipulating that beer be produced in the province in which it is sold.

While fellow entrepreneurs Bond, Murdoch and Holmes à Court are apparently content with building trans-

continental empires, Elliott is flirting with a political career. Aside from his current objective of, as he puts it, “Fosterizing the world,” he is also president of Australia’s opposition Liberal party, and the media frequently quotes him on public policy issues. His conservative-minded party recently released an economic policy document calling for reduced tariffs and industrial subsidies, privatization of Crown corporations, less government regulation of the economy, and policies to reduce interest rates and inflation.

Elliott has publicly advocated a federal consumption tax and frequently finds himself at odds with the party’s parliamentary leader, John Howard. But he remains evasive about his plans. Said Elliott: “Political work can be very frustrating, but I think it’s important to do it.” As a result, while some of his contemporaries will continue to be international players in the world of business, Elliott could be the one destined to stride the political corridors of power.

D’ARCY JENISH

JOHN HOWSE