Brierley's year of the dog

By Geoff Senescall

Whenever a new executive joined Brierley, so folklore has it, he got to pick an investment for the company to make.

Perhaps it's true. How else could the company have built up such an interesting nest of piddling non-performers over the years, like Cabarett Coullee (an oil company in the United States), for example, or Cedenco (a local tomato processing business)?

Stories are also told about tantrums because the corporate jet was five minutes late and lavish accommodation costs of $1 million a year being paid to house an executive in Asia.

If the tales are true, then one thing is certain - they are true no longer. For it was almost a year ago today that things changed forever at one of New Zealand's most legendary corporate players.

Despite obvious extravagances made possible by head office expenses of around $65 million a year, by April last year Brierley had become an unhappy household.

The share price was collapsing and the board and management were at odds. Things had to change. Even those on the inside agreed.

However, none - with the exception of Tan Sri Quek Leng Chan, the Malaysian-based billionaire who controls 20 per cent of Brierley - had any idea of just how dramatic that change was going to be.

It was something that was going to irrevocably alter the face of Brierley. It was April 26, 1998 when a board meeting to review the company's future turned into perhaps the biggest corporate bust-up seen in this country - one which left the once-respected corporate raider without either a chairman or chief executive.

Twelve months on, the company has only just been stabilised.

Because so many people were involved, exactly what occurred over the three days of meetings in Sydney is a matter of interpretation.

Certainly, former Brierley chairman Bob Matthew's subsequent account of events differs from that of the company. Just days ago, his defamation case against Brierley was settled out of court.

However, one thing is clear: that tumultuous meeting and what unfolded make a cracking corporate soap opera.

This story begins with the Brierley board (bar Quek) and a contingent of advisers checking into the Park Hyatt in Sydney on Friday April 24.

Ominously, Quek and his lieutenants stayed elsewhere, at the Star City casino hotel.

On the Saturday the discussions revolved around the findings of a strategic review aimed at charting a new course for Brierley. But other agendas were being played out in the background.

In the months leading up to the meeting it had become increasingly apparent to those inside Brierley that a rift had developed between Bob Matthew and chief executive Paul Collins.

The situation got to the point where Matthew decided he would resign at the meeting.

But he wanted to take Collins with him. He had warned Collins of his plans several days previously over a glass of wine in a Wellington bar.

Going into the weekend, Collins did the numbers and was confident he would survive. Quek, however, had other ideas.

Introduced to the company in March 1996 by two Brierley executives living in Asia, Andrew Meehan and Stephen Temple, Quek had watched the value of his investment fall sharply.

He had paid 140c a share and the price was now hovering around 100c. It was a far cry from the 200c Collins had promised shareholders. Obviously frustrated, Quek saw his opportunity. Interestingly, he had no beef with Matthew. But he realised his influence was always going to be minimal while Collins was at the helm.

On Sunday he laid down his trump card, threatening to call a shareholders' meeting if Collins didn't resign.

His action spooked the board. Some who had previously supported Collins wavered.

Collins' allies argued that he should stay for a year and blood a successor. Credit Suisse First Boston boss Bill Trotter, a close friend of Collins, was touted as a candidate. But Quek was unrepentant. He wanted Collins out. The board had no stomach for a public fight.

A meeting of the seven non-executive board members followed. It was decided that Collins should leave.

That Sunday evening, Sir Roger Douglas, who was then a Brierley director, persuaded him to go.

The following day Collins' much publicised $4 million exit package was negotiated.

A public statement was brokered. Quek had won the day. But it was a pyrrhic victory. What Quek hadn't anticipated was the massive destruction of wealth which followed.

The coup effectively left Brierley leaderless. With Quek's blessing, Sir Roger stepped into the breach as executive chairman. But he had little corporate experience.

Sir Roger had originally backed the plan to gradually ease Collins out. Without a chief executive at his side, he leaned heavily on his advisors, particularly Cameron and Co, the Wellington merchant bankers involved in the strategic review.

He was looking for a textbook solution to Brierley's woes rather than a gloves-off approach to fixing the mess. Relations between Sir Roger and Quek soon became strained.

Sir Roger, despite having been a public figure during his time as Labour finance minister, was not a great communicator. And Quek was not known as a patient man. Indeed, his temper is legendary in the Brierley offices.

Anyone who had seen him on the other side of the boardroom table knew he was capable of tantrums, banging his fist on the table or walking out of a meeting to get his way. Sir Roger's way of dealing with this was to avoid him.

The brown stuff hit the fan in August when Sir Roger failed to sell British hotel chain Thistle, Brierley's largest asset. Quek was already unhappy that Sir Roger had left the sale in the hands of Collins and Brierley executive Rodney Price.

Everything initially had looked rosy. There was speculation Japanese securities house Nomura was looking at Thistle. In fact, it had signed an agreement in principle to buy the hotel chain for around 210p a share, subject to due diligence. But the deal never saw the light of day.

Doubts have since surfaced about Quek's commitment to the sale, but the real reasons for Nomura pulling the plug so late in the play remain the stuff of rumour and innuendo. Quek hit the roof over the failed sale and the share price hit the floor. He promptly called for Sir Roger's head. At Brierleys' November meeting, Sir Roger stepped down as chairman.

Two months previously, Brierley had announced the biggest loss in New Zealand's corporate history. The $904 million deficit put Brierley at odds with its bankers, and quashed any hope of a dividend. This was a severe blow to Quek, whose own finances were already under strain.

Meanwhile, spiralling asset prices were starting to cause concern within Brierley. If the trend continued, the company would need to raise capital. Secret talks were held with Nomura, Macquarie Bank and CSFB.

Behind the scenes, another player was also making a pitch - Disney-linked Shamrock Capital Advisors, led by the cigar-chewing Porsche fanatic, Stanley Gold.

Shamrock publicly announced its plans on October 12. In fact, Gold and his merry men had been hovering in the background since May. It was Cameron and Co executive Ian Dixon who introduced the two parties. Dixon flew to Hawaii with Sir Roger to meet Shamrock.

Brierley was initially excited about Shamrock, seeing it as a white knight that would rescue it from the increasingly disgruntled Quek. But Shamrock couldn't offer Quek a good enough deal, and no progress was made.

Shamrock, however, was not put off. Brierley was in trouble and the US investment house knew it. In September, Shamrock put a so-called rescue proposal to Brierley, similar to the one it went public with a month later. Both proposals included a capital injection in return for a favourable options deal, a management contract and board seats.

Despite the fact that the plan would severely dilute Camerlin's stake, Quek showed interest. But Brierley did not. They saw the proposals as too favourable to Shamrock. Those inside Brierley were not fooled.

They believed Quek was using Shamrock as a stalking horse. Indeed, Quek left it to Shamrock to publicly berate the company.

By whipping up shareholder concern over Brierley's performance, Shamrock was able to oust directors Richard Longes, Peter Dodd and Fran Wilde, giving Quek a firmer grip on the board. Just days before that meeting, a tortured Sir Ron Brierley toyed with making a play for his old company, but he backed out at the last minute.

However, there was some consolation. His friend and former colleague Sir Selwyn Cushing took over as Brierley's new chairman. Sir Selwyn didn't get on with Shamrock. Within a month, it was out in the cold. Quek stood by and watched, seemingly unconcerned.

Sir Selwyn was later appointed chief executive but within weeks he was in hospital having heart surgery. In his absence, the long-serving and faithful company secretary Mark Horton filled in for him.

Twelve months on from that fateful board meeting in Sydney, Quek, whether by design or circumstance, remains in control. He has shown he is a cunning operator.

Today, he has Brierley right where he wants it, focused on Asia. But without a majority stake, he is vulnerable. Ideally, he will want to increase his holding. The best way he can do that while his finances remain tight is via a share buyback in which he does not participate.

Interestingly, a share buyback was mooted earlier this month as part of Brierley's business plan.