Gaynor: Year deals generous hand to some

By BRIAN GAYNOR

Most of us will welcome in the New Year with a hiss and a roar, but several businessmen will be reluctant to see the old year come to an end.

These are the individuals who made hay during the year, who did the big deals that greatly enhanced their wealth. Some deserved their good fortune but others took advantage of our lax regulatory regime or had lady luck sitting on their shoulder.

This is a brief description of some of the best wealth-creating deals, from an individual perspective, in 2001.

Rod Duke - $281.8 million

The most lucrative deal this year, as far as any individual was concerned, was the Briscoe float.

At the beginning of the year, Rod Duke owned all Briscoe's 100 shares at a total cost of just $100. In November, Briscoe had a 1,700,000 for one share split and Mr Duke ended up with 170 million shares.

He then sold 12.5 million shares at $1 each to several parties including Gerard Harvey and Harvey Norman Holdings.

Briscoe issued 40 million new shares to the public at $1 each and Mr Duke's remaining 157.5 million shares are now worth $269.3 million.

It has been a jackpot year for Rod Duke. He turned a $100 investment into $281.8 million through the sale of 12.5 million Briscoe shares and the public float of the retail group.

Howard Paterson & Friends - $66.1m

Two of the more profitable deals this year were the formation of Botry-Zen and Pharma-Zen and their subsequent quotation on the Stock Exchange's unlisted securities facility.

Botry-Zen issued 116.7 million shares to several individuals, mainly Howard Paterson, Dr Cheung-Tax Hung, Dr Max Shepherd and David Parker, for a total of $1000 or 0.00000857c a share, and then sold 50 million shares to the public at 10c each. Pharma-Zen issued 80 million shares to the same four individuals for $1000 or 0.0000125c a share and subsequently sold 80 million to the public at 10c.

The total market value of shareholdings for Mr Paterson, Dr Hung, Dr Shepherd and Mr Parker in Botry-Zen and Pharma-Zen is $66.1 million. This is very attractive return on an investment of just $2000, particularly as both companies have yet to prove they are commercially viable.

Peter Masfen - $36.2 million

Peter Masfen was a major beneficiary of the bitter battle for control of Montana Group.

At the beginning of the year Mr Masfen, Montana's chairman, held 42.8 million Montana shares with a market value of $3.95 each at the time.

On February 7, Allied Domecq announced a takeover offer at $4.40 a share, but Lion Nathan quickly jumped into the market and started buying Montana shares at $4.65.

After a protracted conflict, Allied Domecq finally got the upper hand and its $4.80 a share offer to all shareholders was successful.

The outcome was particularly satisfying for Mr Masfen because he supported Allied Domecq's bid and realised a gain of $36.2 million from the beginning of the year to his acceptance of the offer.

As Mr Masfen had a gain of $79.6 million on his Montana holding last year and $52.7 million in 1999 he has been well rewarded for his astute stewardship of the country's largest wine producer.

Peter Francis - $16.1 million

Peter Francis, the former chairman of Force Corporation, had more than his fair share of luck this year.

At the beginning of the year, Mr Francis held 77.7 million Force shares (50.2 per cent of the company) with a market value of 24c. A few months later Sky City made an on-market bid for the company at 25c a share and Mr Francis accepted in respect of all his shares.

Force's share price subsequently collapsed because of problems with its Argentine activities. Mr Francis was largely responsible for this investment.

Based on Force's latest share price, Mr Francis would be worse off to the tune of $16.1 million if Sky City had not made its 25c a share offer.

In another twist to the story, Mike Daniel, a Force director and close associate of Mr Francis, rejected the Sky City bid and bought an additional 1.8 million Force shares at 26c after the offer closed.

Mr Daniel must be kicking himself for breaking ranks with his long-time colleague.

Jim Boult - $7 million

At the beginning of the year, Armada Holdings, which is controlled by Queenstown entrepreneur Jim Boult, owned 13.2 million Shotover Jet shares with a market value of 46c each.

At the end of March, Ngai Tahu Investments bought these shares at 99.3c each, giving Mr Boult a profit of $7 million since January 1.

This lifted Ngai Tahu's shareholding to 80.5 per cent and Mr Boult promptly resigned as chairman of Shotover.

Mr Boult was lucky that the deal was completed early in the year because under the Takeovers Code, which was introduced on July 1, Ngai Tahu would have to make an offer to all shareholders on the same terms.

It is highly unlikely that Ngai Tahu would have offered 99.3c a share under a code offer.

Ngai Tahu was extremely generous to Mr Boult as Shotover Jet had a sharemarket high of just 60c this year.

Craig Heatley - $6 million

On May 21, Craig Heatley notified the Stock Exchange that he proposed to buy 160 million eVentures from Softbank and epartners at between 14c and 16.8c a share.

This would have given him an immediate book gain of between $6.7 million and $11.2 million based on eVentures' cash asset backing of 21c a share.

After extensive pressure from his former board colleagues - Mr Heatley resigned as chairman and board member of eVentures early in the year to take an extended overseas holiday - the deal was changed and eVentures bought back and cancelled the 160 million shares.

eVentures now has 90 million shares on issue and a cash asset backing of approximately 36c a share.

As the net asset backing has risen from 21c to 36c as a result of the share cancellation, Mr Heatley has a book gain of $6 million on the 40 million shares he already owned. He also controls the company and has been reinstated as chairman.

Mr Heatley argues that all remaining shareholders benefited from the cancellation of 160 million shares. This is true, but the company's chairman is the big winner because he was issued 40 million shares at 15c each whereas the public paid 60c a share.

New Zealand residents - $71.37 each

The Government bought 3.4 billion Air New Zealand shares on our behalf at a total cost of $885 million. As these shares are now worth $1,161,666,667 and, according to Statistics New Zealand, there are 3,876,700 of us, then each New Zealand resident is sitting on a profit of $71.37 on the Air New Zealand investment.

That doesn't exactly place us all in the Rod Duke class but it is encouraging to note that at the beginning of the year Mr Duke had an investment of only $100 in the Briscoe Group.

* bgaynor@xtra.co.nz