What the wealthy have put up for sale

Finding the common characteristics of wealthy entrepreneurs is never easy – the rich come from many different backgrounds and there are so many different ways to make money.

A few common traits stand out, such as passion, determination, a capacity for hard work and a willingness to take risks.

But one of the most important is a sense of timing. Wealthy entrepreneurs are brilliant at sensing the right time to buy and more importantly sell assets to maximise profits.

So when the rich start selling, it’s important to figure out why.

In the last six months, we’ve seen a sharp rise in the number of wealthy entrepreneurs putting assts on the sales block.

Just this week, reclusive property billionaire John Gandel – best known for owning half of mega mall Chadstone – announced he was selling his 50% stake in Melbourne shopping centre Northland, which has been valued at $910 million by Gandel’s partner in the centre, CFS Retail Trust.

In recent weeks we’ve also seen rich list members John and Robert Kirby, major shareholders of Village Roadshow, put that company’s stake in radio group Austereo on the sale block.

And there are persistent reports that James Packer is set to sever his family’s last link to the agribusiness sector – a 51% in beef processing giant that could be worth up to $500 million.

The second half of 2010 also saw a number of rich-list related asset sales too.

In November last year, the Grollo family’s property development company Grocon sold three buildings – including two office towers in Melbourne’s docklands precinct and a 50% share in the QV shopping centre and office tower – for $581 million to Commonwealth Property Fund.

In October, Kevin Maloney sold his listed mining services group The MAC Services Group in a $651 million deal, from which he took about $340 million off the table.

In August 2010, veteran beverages entrepreneur Peter Brook sold his company P&N Beverages Australia to Japanese beverages giant Asahi Breweries for $364 million. He is not on the BRW Rich 200 list year, but he should be in 2011.

So what are the reasons for these sales? And what trends should investors and entrepreneurs be watching?

Let’s take a look at some of the key drivers of these sales:

Rising asset prices

While the subdued performance of the Australian sharemarket suggests there are still bargains around, there does appear to be a sense among entrepreneurs that asset prices are rising again as the GFC fades from view. Clearly, you have to find the right buyer – typically one who has relatively low debt levels and a real need to do something with the cash they are sitting on, like a private equity firm or an institutional investor. It is these institutions that John Gandel will be looking to tap into in his big sell-off, as the Grollo family did.

Consolidation

The size of the Australian market means scale is crucial and in many sectors consolidation continues. Food and beverages is a good example – Peter Brooks told SmartCompany that he needed to get big or get out, and the cost of getting big was basically too high. James Packer will no doubt be hoping the global consolidation in the food sector will help him secure a good price for his Teys stake – global giant Cargill is reportedly the front-runner to buy the stake.

Restructuring

The sale of Village Roadshow’s stake in Austereo should give the trio who run the business – Robert Kirby, John Kirby and Graham Burke – a great deal of flexibility in terms of the strategy they want to pursue. If the trio can realise $400 million or so, they will be able to partly pay off the $1.3 billion debt Village carries and potentially set the company up for a privatisation play – something that was mooted as recently as last year.

Packer is also restructuring. He has spent the last three years selling off assets he considers non-core to his family’s gaming and media empire and it has been a profitable process. His sale of Consolidated Pastoral Company to Britain’s Terra Firma in April 2009 for $400 million was one of the biggest deals in recent agribusiness history.

Bargain hunting

Some wealthy entrepreneurs have a certain knack for asset trading – selling up one thing and investing in another at just the right time. Lang Walker is one of those – he sold a large chunk of his property empire just prior to the GFC for about $1 billion, and subsequently snapped up assets from distressed buyers when the debt hit the fan.

Gandel appears to be trying something similar. According to his selling agent, Simon Rowley of Jones Lang LaSalle, Gandel wants to switch out of physical property and into property shares, as he thinks Australia’s real estate investment trusts still represent good value. His timing looks good.

Debt reduction

Not every rich-related asset sale is being driven for strategic reasons – some are just about survival. The best example of this is Perth property developer Luke Saraceni, who has sold off a number of assets in recent weeks (including property and a luxury boat) after receivers moved in on his $550 million office tower project, Raine Square.

The exit

Many entrepreneurs put business exits on the back burner during the GFC and are only just starting to examine succession options. Kevin Maloney’s sale of The MAC Services Group is probably the only pure exit we’ve seen to this point, but we are likely to see more as economic growth and asset prices pick up.