Want to stay rich? Timing is everything

Lost among the finger pointing that followed Pacific Brand’s decision to sack 1850 workers and close its Australian manufacturing plants was the story of a great escape.

One of Pacific’s best-known labels is Hard Yakka, the iconic clothing company whose overalls, shirts and shorts are worn by tradies all over the country.

But the Yakka label is a relatively new addition to the Pacific Brands stable, having been acquired by the company in February 2007.

Yakka was founded by David Laidlaw in 1922 at the back of his family home in Melbourne. The company boomed during the 1940s when it won large war contracts, and later, under the leadership of David’s son James, moved into corporate apparel, providing uniforms for companies such as Telstra and Australia Post.

But as the tariff wall protecting the Australian textile, clothing and footwear sector was dismantled and low-cost manufacturing centres such as China, India and Thailand came to dominate, things got tougher for Yakka. After 85 years, the by then principal John Laidlaw made the decision to sell the business. His message was simple: Yakka needed to get big, or get out.

The family – who are worth around $280 million according to BRW‘s Rich 200 list – reportedly received $270 million for Yakka.

In hindsight, it was a wonderful deal, done at the height of the bull market. Since the transaction was completed, Pacific Brand’s share price has fallen from just above $3.00 to around 25c. 

While it’s difficult to say whether the value of Yakka would have fallen this far had it stayed in the Laidlaw family’s hands, the staggering fall in Pacific Brand’s value indicates the Laidlaws received a very, very good price.

Of course, John Laidlaw wasn’t the only wealthy entrepreneur to sell up at just the right time and (partly) dodge the wealth destruction bullet.

Kerry Harmanis

Perth mining entrepreneur Harmanis made one of the great boom-time mining deals when he sold nickel miner Jubilee Mines in February 2008 to Xstrata. Harmanis netted $470 million in cash from the deal. Since February 2008, Xstrata’s share price has fallen 84% and the nickel spot price has crashed by around 65%.

John Kinghorn

Kinghorn made about $650 million when he floated his RAMS Home Loans business in July 2007. He picked the top of the market almost precisely.  Just weeks later, RAMS began to implode after struggling to refinance more than $5.5 billion worth of mortgages. A few months later, the company was purchased for $140 million by Westpac.

Solomon Lew

Veteran retailer Solomon Lew sold the 5.9% stake in Coles Group held by his investment vehicle Premier Investments to Wesfarmers for $1.1 billion. Had he opted for Wesfarmers scrip – as many Coles Group shareholders did – he would have lost more than half of the value of his investment.

John Van Lieshout

Queensland-based entrepreneur Lieshout sold his furniture chain Super A-Mart to private equity investors for $500 million in July 2006, at the height of the private equity boom. Lieshout told me at the time he simply couldn’t believe the price he was offered; one year after the deal, he gleefully reported that his sources inside the company told him the private equity owners found precious little fat to cut. While it’s hard to know exactly how Super A-Mart would be valued now, it is worth noting Harvey Norman’s share price has crashed 50% since the deal.

Carlo Salteri

Billionaire Salteri sold the defence arm of his family’s contracting company Tenix for $775 million in early 2008 to British defence giant BAE Systems. It was another case of get big, or get out – Tenix was struggling to expand overseas and spending hundreds of millions of dollars on research and development and infrastructure just to keep up with its competitors. Salteri appears to have picked the top of the market, or close to it – since the sale, BAE shares have fallen by around 21%.

Ken Talbot

Queensland-based mining entrepreneur Talbot remains embroiled in a corruption scandal, but it hasn’t affected his sense of timing. The founder of independent coal company Macarthur Coal decided to sell out between May and July last year, sparking a bidding war that pushed Macarthur shares from $9.20 at the start of 2008 to more than $20 by the middle of the year.

Talbot netted around $700 million from the sale and has since watched Macarthur’s shares fall to around $2.40. Talbot also sold his pub company Talbot Hotel Group for around $130 million in 2007, at the height of the pub market boom.

Lang Walker

Property developer Walker sold the bulk of his property assets to Mirvac in late 2006 for around $1.2 billion. Since then, the commercial property sector has been pushed to the wall by the credit crunch; Mirvac’s share price has fallen by 80% and Walker is set to use his war chest to swoop on bargains.