Now's the time for Hart-y laughter

Graeme Hart

Predictions of Graeme Hart's financial demise across the Tasman have been grossly exaggerated. And his departure was predicted just short of a decade too soon.

This week, Hart unveiled plans to buy out the remains of ASX-listed food company Burns Philp and bring the value back to his private Auckland-based investment company Rank Group.

Even accounting for a dose of transtasman rivalry, Mark Westfield's stinging attack on Hart's ability as a businessman has proved way off the mark.

"New Zealand has produced many entrepreneurial types over the years who have developed an unenviable reputation for squandering large sums of money on companies that no Australian investor will touch. You have just eclipsed them all," Westfield wrote in September of 1997 with Burns Philip on the brink of collapse.

"It is spring and the weather will be getting a lot better across the Tasman ... Perhaps you could write a book on how to run a small business."

This spring, Hart and his long-serving team will complete their extended corporate raid.

If the takeover deal goes to plan (and market indicators suggest it will), they will be hauling back across the Tasman a net A$2.5 billion ($2.99 billion) in cash as well as Blue Bird Foods (still on sale for about $250 million) and a 20 per cent stake in Goodman Fielder.

Sources close to Hart say his total outlay for Burns Philp so far is about A$400 million. It will cost a further A$1.3 billion to buy the remaining 42 per cent of the company but the Australian foray has been a financial triumph by any definition.

But those who work closely with the billionaire say Hart isn't just trying to build the biggest pile of cash.

"I don't think he's doing all this just to put a roof over his head," said a colleague.

"Given the heartache those guys [the Rank team] had at the outset with Burns Philp, and that they're all still together, it must be really satisfying to go through that journey having created a lot of value, not only for themselves but for those who were investing alongside them."

While Hart is not quite the business hero he is in New Zealand, the Australian view of him has softened somewhat - although his latest move was still viewed with suspicion by Australian media this week.

Some went as far as to suggest that Hart's failure to find a new acquisition for Burns Philp amounted to a failure.

One Australian analyst said there was a real sense of disappointment among those who had made money on his coat tails.

"He hasn't been able to find an acquisition to date and he recognises there is an element of public accountability when he has other shareholders," he said. "It's disappointing to see the company go. I think it will be very successful unfortunately."

There is some suspicion that Hart may have found his acquisition and simply wants to avoid sharing with other shareholders.

"He's got his eye on something, he just wants to do it on his own without incurring the vagaries of the listing requirements," says Rickey Ward, of fund manager Tyndall.

If he has - in typical Hart style - he is keeping it pretty quiet.

Since Burns Philp floated Goodman Fielder last December, there has been intense interest in what it will buy next.

Speculation has thrown up a diverse range of targets - from packaging giant Amcor to Lion Nathan, retailer Coles Myer and even Telecom NZ.

Hart has always tended to invest in sectors that are out of favour with the market.

Telecom fits that bill but would have little other appeal for Hart.

It has regulatory risk and requires heavy investment. And, like Lion Nathan and Coles Myer, it is at the mercy of fast-changing consumer trends.

Hart's investments in the past decade have been considerably more down to earth. Literally bread and butter.

The world could descend into political and economic turmoil but "I'm pretty confident you're going to eat your toast in the morning", Hart told the Business Herald in 2003. "And you're going to put butter on it."

Hart has invested in sectors where his team has time and space to work on the costs and management side of the equation.

Having worked his way through the Australasian food sector, and having bought Carter Holt Harvey last year, he will almost certainly now turn his attention to creating a packaging empire.

That would have been difficult with Burns Philp money.

With all the equity privately held, Hart can more easily invest in areas which have synergies with CHH. So in Australia, Amcor makes plenty of sense as a target.

The only problem is likely to be price.

Whether it's because he learned a hard lesson after paying over the odds for his first 20 per cent of Burns Philp (the 1997 A$260 million buy was down to A$50 million within three months) or just a natural aversion, Hart hates paying full market prices.

In the past two years, an overhang of investment capital has generated a frenzy of buying by Australian private equity funds desperate to grab assets on both sides of the Tasman. To Hart's way of thinking, there may be no bargains left in Australasia - at least for now.

For more than two years, he has been consistent in his response to questions on what he will buy.

Even in 2004 (before the Goodman float) when interest on Burns Philp's debt was burning through as much as $300,000 a day, he remained cool as a cucumber.

"When we find the right opportunity, we will move ... if we don't, you just have to be patient," he said.

Some two years later, he is aware that the patience of some Burns Philp investors may be growing thin.

But without the pressure of minority investors, he is free to bide his time.

Paul Richardson, of BT Funds Management, said the US food and beverage sector could have some appeal - but "nobody knows ... What he will do will surprise people, I'll guarantee that".