Wellington's boot boys are back

Wellington's boot boys are back

Ron Brierley politely suggests that it's "unlikely" he will be sharing Christmas drinks with Stan Wallis this year. He's smiling as he says it - but even he concedes he had a few doubts about his own credentials to challenge the former chairman of Coles Myer head-on.

He still did so, of course - provoked, he insists, by a genuine sense of dismay "that comes when you see things you just don't think are right, almost regardless of the commercial aspects".


"The fact that Coles Myer has been such a disappointment has a commercial and a philosophical impact," he says.

Such pious sentiments are enough to make plenty of other corporate chairmen splutter over their Christmas drinks too - particularly if they remember the turbulent assaults by Sir Ron and his company, IEL, on so much of establishment Australian business during the 1980s and the fear and loathing his name still engenders among many.

These days Ron Brierley, 65, is usually far more low-key, right down to the t-shirts and shorts and gym shoes that have become his normal business attire when he does go in to the office. Most of his corporate targets also tend to be much smaller scale.

Yet Sir Ron can clearly still be an extremely effective and dangerous opponent of the big boys when he chooses.

His vitriolic attack, for example, on the initial ambition of Stan Wallis to remain in the chair of Coles Myer until the company's annual meeting later this month was one of the classic corporate knifings. In a letter, he told Stan it was "an obvious contradiction that a failed and departing chairman should purport to 'lead that process of change'."

Sir Ron did apologise for writing in such "uncomplimentary terms", but later told the media that Stan Wallis "didn't have anyone's support and has been a total failure and he knew it".

Ahem. This greatly increased the pressure on Stan Wallis to exit the chairmanship earlier - which he did last month - and publicly signalled the extraordinary personal animosities and chaos that were about to engulf the Coles Myer board. It was also vintage Ron Brierley and his loyal lieutenant, Gary Weiss.

Brierley is now chairman and Weiss, 48, executive director of the Guinness Peat Group, an investment company incorporated in the UK with most of its individual investors long-term Brierley devotees from New Zealand.

"To that extent, GPG slightly falls through the cracks in Australia," Brierley says. "It's sometimes seen as more of an IEL old boy's club and its profile is not great relative to the old IEL days. But it's focused on achievement - not profile and publicity. What happens, happens."

Brierley and Weiss remain the extraordinary odd couple of Australian corporate life - an idiosyncratic financial obsessive with a penchant for catching trains for his holidays and a guitar-playing, long-haired, brilliant legal brain who initially refused to do corporate law in Wellington because he didn't approve of profits. The aversion to capitalism didn't last long.

Weiss was the son of Czechoslovakian immigrants to New Zealand where his father was a button maker and his mother a bookkeeper. He moved to Australia as a superbly qualified young corporate lawyer in 1983, with a doctorate from Cornell. Already a fan of the legendary Ron Brierley's exploits, he soon joined him at IEL.

"When I first saw him, I couldn't reconcile it with the mental picture I had from these excellent references," laughs Brierley. "It was definitely a meeting of minds on an intellectual basis and personally I related to his way of thinking as well."

It remains a mutual enthusiasm, though Brierley jokes that Weiss disapproves of his dress code. Not that excessive formality is obvious in either man. Weiss's desk, the floor around it and an open brief case still overflow with papers and reports. On the walls are numerous drawings and cartoons of Brierley.

That which unites the two men still in what Weiss calls "an almost symbiotic relationship" is the excitement and intellectual challenge of finding hidden business opportunities - in the small print or in poor management. It's their version of fun. And certainly money.

They are also among the few left standing, feet firmly on profitable ground, after both the heyday of the takeover entrepreneurs in the 1980s and then the tech mania of the 1990s.

Their activist role in the Coles Myer saga is formally based on GPG's 16 per cent shareholding in Premier Investments, controlled by Solomon Lew. GPG originally bought into Premier in 1994 for an average reputed price of 70c and has since traded in and out. Premier now has built up its holding in Coles Myer to more then 8 per cent as the base for Lew's determined attempt to remain on the board. Brierley has conveniently just taken over the chairmanship of Premier. Lew also happens to be a long-term friend of Weiss.

But the key to GPG is that no matter what happens to Solomon Lew, Guinness Peat Group is likely to remain ahead of the game.

"Ron and Gary Weiss don't often come second when they fight," says one admiring investment banker. "And when they do, they usually walk away with a lot of money."

So yes, GPG is strongly backing Lew to stay on the board - and Brierley is obviously being touted as an alternative potential candidate for the board at some later stage. But if Lew gets kicked off, the expectation is that institutional investors, relieved at the prospect of greater stability, may finally return. That would mean the Coles Myer share price is likely to rise, at least in the short term.

"Our involvement in Premier, our involvement in Coles Myer, is entirely on a professional basis of seeking not only to protect the interests of Premier's investments but hopefully to advance the economic interests we have," Weiss says. "Personalities are not something that interest either Ron or myself in terms of the way we conduct our business activities."

Maybe not. But they have always seemed to conduct their business activities with great personal relish and a certain mischievous sense of black humour.

Weiss prefers to describe it as part of getting a psychological edge, useful for tactical reasons. And those with whom they fought such spectacular battles in the past - Holmes a Court, Bond, Spalvins - are all now footnotes in the history of the decade of entrepreneurial excess. Nor did IEL itself survive, caught by too much debt in the crash of 1987 and riven by personality disputes as others tried to push Brierley into the back seat. The message - though not from Weiss - was that Brierley's era was past and it was time to settle down and run the company along more traditional lines. It didn't work.

IEL was eventually snapped up by John Spalvins only to have his own tottering empire later skewered by an "independent" and very detailed report into its finances. Author Ron Brierley. Surprise. Weiss and Brierley have long and extremely forensic memories.

"The only part of the Adsteam empire to have significant net worth is what it got from IEL because we had such quality assets," insists Weiss, citing previous stakes in companies like AGL, St George Bank and Woolworths.

Demonstrating an attraction to high-wire acts, Weiss went on to work with Neville Wran, Malcolm Turnbull and Nick Whitlam at the investment bank Whitlam Turnbull for a few years.

"I still had a passion to do something again with Ron and to revert to being a principal rather than an adviser," he says. "Being an adviser was very difficult in the sense that I would often recommend a course of action to people, which seemed to me blindingly obvious, but it was not necessarily so to the recipient of the advice."

It meant Weiss soon rejoined Brierley and a few other loyalists from the IEL glory days at GPG at the beginning of the 1990s. The basic philosophy was still the same - identifying undervalued or mismanaged companies and working them over - but their psychology was very different, according to Sir Ron. No debt for a start. IEL had impressed the perils of that upon them.

"To some extent it was making a virtue of necessity, " Brierley chuckles. "I don't know that there was a queue of lenders lined up outside the door anyway."

But when the 1990s boom meant that anyone with half an idea could add net or dotcom to their company name and immediately raise millions of dollars from eager investors, Brierley and Weiss kept away from the lure.

Even a mid-American phone company Weiss had inherited via his reconstruction of Ariadne didn't appeal. He sold it to a chap in the US - then little known - called Bernie Ebbers who went on to Worldcom infamy.

Instead, Brierley and Weiss concentrated on industrial or financial companies in the UK, New Zealand and Australia. The GPG view is that they are particularly skilled at identifying and crystallising value in companies that are not being run particularly well.

A less charitable view is that they specialise in reading the legal fine print to take advantage of whatever they can get away with technically.

Weiss shrugs off that type of criticism with some irritation - though some of the examples of GPG's success he likes to quote reflect just that approach. None is more amazing that the fiasco of the Ampolex shares in the mid 1990s when Mobil was making a bid for what used to be Australia's third-largest oil and gas company. GPG bought options over six million Ampolex convertible notes and claimed an obscure clause in the trust deed meant they were actually worth 6.6 shares rather than one each. The case was eventually settled but GPG made a lot of money out of its claim, even after legal costs.

"Ron, in my mind, is the best bush lawyer I've ever come across, with one of the finest grasps of legal principles," Weiss says.

There was always a bit more to it than that. As Weiss says, it's rare for a company that is performing well to be the subject of GPG's attention.

"There is no magic formula," he says. "We try and do our homework. We understand the businesses that are in the companies and their position in their particular industries and we work hard. Often it is just a case of going back to basic business principles, a sense of business discipline and focusing on what you do best."

Just this week, for example, GPG doubled the value of its original investment in a malt processing group, Joe White Maltings. This was after mounting a hostile takeover bid in 2000, restructuring the company to sell off non-core assets and then accepting a friendly takeover bid for its 52 per cent share.

They are also particularly proud of their work at the financial services company, Tyndall, a near basket case with a market capitalisation of $15 million when GPG acquired control of in 1991. After large injections of capital and a lot of work, it was sold to Royal & Sun Alliance for about $750 million in 1999.

"We grew this company," Weiss says, "We were based there, we lived it and turned it into a huge success. They are two clear examples of how we can restore value to companies.

"But ultimately, once the job of restoration is done, one usually finds that for these companies to go to the next stage, there are hugely more natural owners than GPG."

Not that it always goes so neatly.

At the annual general meeting of Brickworks eight days ago, for example, Brierley and Weiss were in the fourth row from the front peppering the board with questions about company strategy and making their dissatisfaction with the answers plain. It wants the company to restructure.

But in fact, GPG sold out of half of its investment in the brickmaking company earlier this year, albeit at a profit of more than $30 million, after failing to make enough headway in taking it over. It will use its remaining 5 per cent stake to continue to agitate for change but this is likely to be a slow process.

"Anyone who knows Ron knows he won't give up," Weiss says. "We challenge companies, we challenge concepts, we put forward proposals and not all of them are universally accepted."

That's putting it mildly.

The 2002 GPG interim annual report has pithy comments on some of its investments along the lines of "have yet yet to prove their worth but where hope is far from abandoned".

Nor does the report step back from the Brierley Weiss view of now fashionable corporate governance.

"Although auditor independence provides a simplistic target for corporate trendies, it is virtually irrelevant in reality. Competence and a return to common sense are the real issues. As always, GPG accounts are presented on a most conservative basis."

Weiss says that even on the basis of valuing assets only at acquisition cost, GPG's net assets have grown by 20 per cent compounded per annum over the past 10 years. It holds $300million in cash. It has shareholder funds worth more than $1billion and its profits last year were £47.5 million ($132.5 million) and more than £20 million for the six months to June.

"I say to Ron sometimes when we've struck gold - it's not bad for two little boys from Wellington," Weiss says.

Brierley is more circumspect still.

"We thought we were going to conquer the world," he says of his early days.

"It was uncharted territory. We didn't know what lay ahead. Now it's previously charted territory and we have some idea of the end objective."

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