The wrong type of punt

When Nathan Tinkler first started pumping millions of dollars into horse racing and breeding, he cited Ingham brothers Jack and Bob as his inspiration.

The pair’s famous army of racehorses, clad in the brothers’ cerise colours, ruled Australia’s major racetracks during the 1980s and 1990s, with horses like Octagonal becoming the toast of the turf.

And while most thoroughbred owners struggle to turn anything like a profit from their sport, the Inghams were different – in 2008, Dubai’s billionaire ruler Sheik Mohammed bin Rashid al-Maktoum bought the brothers’ operation, called Woodlands Stud, for a stunning $500 million.

No wonder Tinkler wanted to follow their model – and that is exactly what he has tried to do, right down to the exit plan.

Today, Fairfax papers have revealed that Tinkler has tried to offload his racing interests to Qatari royal Sheikh Fahad Al Thani, a young thoroughbred owner who races last year’s Melbourne Cup winner, Dunaden.

The deal, for a reported $200 million, did not go ahead and now Tinkler has been forced to turn to friend and fellow thoroughbred enthusiast Gerry Harvey.

Yesterday, Harvey’s thoroughbred auction house, Magic Millions, announced it will sell 350 horses from Tinkler’s stable Patinack Farms in a special dispersal sale to be held on the Gold Coast. There are even suggestions Harvey has paid Tinkler a $20 million advance ahead of the sale.

Whether that’s true or not, Tinkler’s love affair with the turf is over.

The coal baron has ploughed somewhere between $200 million and $300 million into his racing and breeding operations, known as Patinack Farm. He’s bought training facilities, stud farms and, of course, hundreds of high-quality racehorse.

Tinkler’s blue and green colours might not have quite got to the level of visibility enjoyed by the Ingham brothers’ famous cerise army, but his stable has quickly become one of the biggest in the land.

For all that though, his returns have been relatively meagre. The most optimistic estimates suggest he might have taken $20 million in prize money and a similar amount in stud fees from the 10 stallions on the Patinack Farm roster. He would have also made some cash selling horses he has bred, but he is unquestionably in the red on his huge racing punt.

News of Tinkler’s retreat from racing will spark many smug calls of “I told you so” from within the industry, which could never decide whether to celebrate Tinkler’s presence or scorn him as a young, rich man in as hurry.

While breeders and others were more than happy to take Tinkler’s cash, you never had to go far to find a veteran who would happily tell you that making a profit in racing is next to impossible, and no amount of short-term spending can guarantee success.

What truly valuable racing and breeding operations have are great, proven stallions, and finding one of those takes years – decades really, unless you are incredibly lucky.

The decision to sell down his racing interests will also lead to inevitable questions about Tinkler’s financial position.

He currently has not one but two mining deals underway and neither is going brilliantly.

Tinkler is trying to orchestrate a $5.2 billion takeover of Whitehaven Coal, a business in which he already owns a 21.4% stake.

While he has managed to get 48.3% of the investors in Whitehaven behind the deal (including his stake), he needs to get another 16.7% of shareholders to back him, or he faces the prospect of having to raise $900 million in equity funding to get the deal over the line.

At the same time as this is going on, Tinkler has missed two deadlines to make a $28.4 million to take a stake in a small coal company called Blackwood Corp. Apparently this delay has been caused by a third-party funder, but there is no news on when the payment would be made.

Missed payments. Asset sales. It’s little wonder Whitehaven investors are less than sure that Tinkler’s big takeover will actually get done.

Notably, Whitehaven shares are at $3.61 this morning. If investors were optimistic the deal was going to go ahead, you would expect to see the stock trading around the $5.20 a share that Tinkler has offered in his takeover bid.

Tinkler might take a big loss on his racing interests, but it’s worth noting his stake in Whitehaven is currently worth $781 million, so he’s hardly headed for the poorhouse.

But his racing retreat will sting and the market waits to see whether his Whitehaven deal will succeed.

James Thomson is a former editor of BRW’s Rich 200 and the publisher of SmartCompany and LeadingCompany.