Turners still baffled why their Feltex rescue failed

Craig (left) and Graeme Turner are still angry that ANZ put Feltex into receivership and killed their rescue bid. Picture / Kenny Rodger

A little over two weeks ago, bedware barons Graeme and Craig Turner - or GT and CT as they call each other - were in a lift descending one of Melbourne's office towers, delighted with the outcome of a meeting.

The brothers were convinced that ANZ bank, lender to carpet-maker Feltex, had agreed to a plan to rescue the ailing firm. The bank would carry Feltex's loan until October, when shareholders would vote on the Turners' offer to inject $63.5 million into the business.

ANZ would suffer a loss by writing off some of its $135 million loans. But in exchange, rival BNZ would give the bank an exit route by promising to bankroll Feltex into the future.

"We thought we had a deal, we actually shook hands," said Graeme, 56, the elder of the two brothers and operations chief of their successful family firm Sleepyhead.

Three days later, their mood could not have been more different. In an email - sent at 3am on the Friday to all those who had registered their names on a website set up to publicise their plans - they broke the news. They had been advised that ANZ had decided to appoint a receiver.

Graeme says: "I was devastated. It really knocked me around. I thought we had something. Over the week I was thinking of all the things we could do to make this business do what I wanted it to do. I was speechless when I first heard it."

In between running an empire that spans property, the Sleepyhead bedware group and coconut oil processing in Papua New Guinea, the brothers had spent almost $2 million and much of the previous year thinking about how to rescue Feltex.

"Friday morning I was very angry, in the afternoon I was frustrated and now I am just just sad," said Craig, 53, the financier of the family.

The two spent the rest of the day in front of journalists and their message was clear. The ANZ's action was precipitate and unnecessary. It was a move that would only destroy value. They also told the Business Herald this week that it scuttled their original plans. Last night they pulled out of the bidding for good.

"It has just gone past the point where we can do anything for it. There is a huge amount of customer concern and dissatisfaction and we are concerned for the brands.

"And the moment it moved from a business that was a listed entity, some of the core investors did not see the opportunity going forward. They wanted a company that has liquidity."

One question still lingers: If the bid was as the Turners say, why did ANZ pull the plug?

Mutterings from all sides are contradictory. Those close to ANZ say the bid was not fully funded and the Turners were making unreasonable demands, such as asking for some form of exclusivity. They say portraying ANZ as the villain deflects attention from accusations that the Turners' entry killed a rival $141.8 million offer by Australian carpet-maker Godfrey Hirst.

Hirst pulled out of the race last month citing concerns it had uncovered as it looked over Feltex's operations and an unwillingness to enter an auction for the assets.

The Turners' reply: ANZ was not taking a loss that was materially greater than it would have suffered under the terms offered by Hirst.

"All we ever said is: 'Here is our offer but we do not want you to shop it to Godfrey Hirst,"' Craig says.

"They were very welcome to go and get best price. But they should have got Godfrey Hirst into a position of giving best price too. We never got past that point. The bid was very serious. This has cost us almost $2 million. You do not do that if you are not serious. The money was there, we had everybody confirmed and signed."

Feltex chairman Tim Saunders said ANZ - an Australian bank - might have favoured a receivership because it did not care so much about New Zealand business and shareholders.

But that is not the Turners' view. "A bank does not put in a receiver easily. We think there is something that we do not know about that has forced the bank into this position," Craig says. "I am still angry about what happened. It can't be around the fact that we could not complete or the fact that we were asking for exclusivity. It may be their intolerance to get to the [shareholder vote]."

This sort of high-stakes finance is a world away from the Turner family fortune's humble beginnings.

Sleepyhead was born in 1935, when Arthur Mudd began a business making kapok (natural seed fibre) mattresses in a small factory shed in Auckland. He was joined by the brothers' grandfather Sidney Turner, an electrician, who took a half share after Mudd was unable to pay his bills.

Sidney's sons, Roy and Bert - father to Graeme and Craig and their younger brother Peter - also joined the business and later bought the remaining 50 per cent.

Graeme Turner joined full-time shortly after he left St Kentigern College. He had worked part time in the factory since he was 8, when his first job was packing bed legs.

The GT moniker came from the tendency in the 1950s to append the suffix to sports versions of production cars. Craig's CT followed and then - surprise, surprise - Peter became PT. Craig joined the firm in 1973 after an engineering apprenticeship.

"Dad was a bit short for engineers, so he said to come in and work for a Christmas ... the rest is history."

They bought out their uncle Roy's share in 1979. Peter, 48, a transtasman powerboat champion, started as a carpenter and besides helping to manage the family's extensive property interests runs his own portfolio.

"None of us has any degrees. We were brought up in the school of hard knocks," Craig says.

When Craig joined the firm, it had just 50 staff. Now it has more than 850, sales of $140 million, a 60 per cent share of the New Zealand bedware market and more than 30 per cent of the market in Queensland.

Oh - and by the way - Sleepyhead operates a Dassault Falcon jet with the firm's logo on the tailfin.

Reflecting his roots, Graeme Turner is not totally at ease with the jet. "We need [it] because we have plants everywhere," he says.

The family's other interests, in addition to coconut oil, include forestry, a 12,000ha beef farm, luxury tourist lodge, property development on the West Coast, and property in Melbourne, Brisbane, Sydney, Auckland, Christchurch and Palmerston North.

They also have extensive interests in rubber processing and manufacturing, not only for bedding but also for carpet underlay. The National Business Review Rich List puts their wealth at $70 million, a figure Craig says is an overestimate.

Their interest in Feltex was sparked by its potential to support their other interests. Carpets and beds are often made from the same materials and sold in the same stores.

Graeme will not rule out manufacturing carpet in the future.

"There is a possibility there. People have started to bring beds in from China and Australia, but they are no cheaper than ours and they are no better and it is the same for carpets."

And although they are disappointed they did not clinch the Feltex deal, they say there will be other opportunities, perhaps with the other investors in their Feltex consortium - Graeme Bowkett, a founding director and shareholder of rubbish disposal group Waste Management; Cliff Cook, founder of retirement home operator Metlifecare; Andrew Bagnall, founder of travel group Gullivers; and US fund manager D.B. Zwirn.

"We have built up a very strong working relationship with the principals and their teams. We will be looking at other opportunities and we have already talked among ourselves," says Craig. "We are committed to growing Sleepyhead and the family interests."

GRAEME TURNER

Age: 56
Married to Lynette
Two children
Education: St Kentigern College

CRAIG TURNER

Age 53
Married to Cara
Six children
Education: Glendowie College

SLEEPYHEAD

Bedding Group
Staff: 850
Sales: $140 million
Operations in Australia and New Zealand

TURNERS' OTHER INTERESTS

Forestry, property, coconut oil, rubber, tourism, beef farming