The loss of North to London-based Rio Tinto is the latest blow to Australia’s already woeful foreign ownership position. And Melbourne is the biggest loser.
With the departure of North and Colonial from the list of independent Australian companies turning over more than $200 million a year offshore, Crikey can now only come up with 40 home-owned companies that qualify for “succeeding over status”.
Compare that with the ever-burgeoning list of foreign companies turning over more than $200 million a year in Australia. This long list now numbers 142 and is growing all the time.
We may finish third or fourth in the medal tally at the Olympics, but Australia has arguably the worst foreign ownership performance of any modern, western economy, with the possible exception of New Zealand.
The loss of North to Rio Tinto is a sad day for Australia and particularly sad for Melbourne. Our fine Victorian capital used to be one of the world’s biggest and most influential mining centres. Now it is a pale of its former self.
The exodus started in 1996 when the Shell-controlled Woodside moved its headquarters from Collins St to Perth. Then Alcoa did likewise the following year. BHP’s iron ore division is already based over there and this year the big Australia quit its lease over 120 Collins St, such has been the contraction in its corporate presence in Melbourne.
Shell spun off its gold operations to create the Melbourne-based Acacia Resources in 1994 but now it has been taken over by the Joberg-based Anglo American. Shell has also sold its Melbourne-based Australian coal-operations to Anglo for $1.6 billion this year.
Now we have the Anglo-associated De Beers bidding $530 million for control of the Melbourne-based Ashton Mining – which owns a 40 per cent stake in the world’s biggest diamond mine, Argyle, in WA.
However, the biggest blow of all to Melbourne was the sell-out of CRA engineered by former managing director Leon Davis and his chairman John Uhrig. The so-called dual listed company structure with controlling shareholder Rio Tinto was designed to retain Melbourne and Australia’s influence in what was the world’s biggest mining company.
But this soon proved to be a sham. Rio’s iron-ore division was run out of Perth, Comalco was shifted to Brisbane along with the coal division and Rio’s presence in Melbourne at its 55 Collins St headquarters dwindled from six floors to one. The big research facility in Melbourne was also scaled right back. The net effect of this was the loss of more than 300 jobs in Melbourne.
It now seems likely that another 300 will go thanks to the North takeover but surprisingly we haven’t heard a peep out of any of our politicians about this.
The Rio troops took over North’s St Kilda Rd headquarters on Friday. The board resigned en masse, effective immediately. Out the door went such well known business figures as chairman Michael Deeley, former Comalco MD Tom Barlow, former ANZ CEO Don Mercer, former AMP CEO Ian Salmon and former BHP Minerals chief Dick Carter,
Now we’re going to see a great sell-off of the company’s non-iron-ore assets – including more than half of its offshore operations.
So what is left in Melbourne? Joe Gutnick has sold Great Central Mines to Adelaide-based Normandy Mining, leaving just Centaur run out of Melbourne. It looks like a basket case and will struggle to see out the year.
Gold miner Newcrest is still chugging away nicely at its St Kilda Rd head office and, of course, there is still good old WMC run by its discredited chairman Ian Burgess and its too-long-in-the-job CEO Hugh Morgan. WMC is performing nicely at the moment but still can’t hold a candle to the hard men who run Rio Tinto.
BHP, now run by a yank, is still here but is contracting all the time as it does little more than ride the oil price higher through its Esso-operated Bass Strait joint venture. BHP’s iron-ore operations in the Pilbara lag badly in terms of cost when compared with both Rio and North so it will be interesting to see if they finally get their house in order now that they are dwarfed by their bigger rival.
The other foreign ownership woes besetting Australia centre around that once great Collins St name Pacific Dunlop, which ironically is chaired by former CRA managing director John Ralph. The Disney family is swooping on PacDun which is simultaneously flogging more assets. The electrical distribution division went Dutch to a mob called Hagermeyer a few weeks back. For the privilege, $340 million worth of Dutch gilders went to PacDun but its share price still wallows around $1.50.
Now Crikey is not for a moment advocating restrictions on foreign investment. It is the lifeblood of any emerging economy. But why don’t Australian companies expand overseas at the same rate that the foreigners come in here? Is our management that bad? Do our institutions refuse to back anyone with a vision to build a global enterprise? We are arguably the most leisure-focused nation in the world so maybe we just don’t care who owns us as long as we can still go to the footy on Saturday and lie on the beach over summer.
Since we last published the foreign ownership lists, Colonial and North have been deleted from the Australian company list and Ridley Corp and Washington H Soul Pattinson have been added.
The foreign list is growing more rapidly with Utilicorp, Singapore Power, Hagermeyer, Rugby Plc and De beers all joining since we last published it.
Please let us know if there are any companies we have omitted.
This is our account of the last ever North Ltd AGM last year. Crikey was the only shareholder to ask detailed questions about the company’s operations as the greenies dominated proceedings.
The Standard of Debate Heads South at North in 1999
By Stephen Mayne
Published November 6, 1999
The AGM and accompanying EGM of mining and forestry giant North Ltd last Friday threw up some interesting issues and some over-reactions.
North is a company that always seems to attract attention to itself, often for the wrong reasons.
Just think about its history for a moment. This is the $3 billion company that was lauded for taking a 4×2 to its iron-ore workforce at Robe River in the Pilbara in the 1980s. The result was some pathfinding efficiency gains and one of the most productive iron ore operations in the world.
It then tried the same tactic at its Burnie paper mill in Tasmania in the early 1990s but bombed badly, eventually taking a $12 million write off and selling its APPM business for about $400 million to Amcor. This was Amcor’s best ever buy because it drove through a lot of job losses in the combined operation without causing industrial turmoil. Former managing director Peter Wade took the rap for his unsuccessful jackboot style of IR in Tassie.
North also controls ERA which runs the Ranger Uranium mine on the border of Kakadu. More than 10 years ago it bought the nearby Jabiluka uranium deposit from Pancontinental and has been running that fight ever since, slowly edging closer to building a decent uranium mine there.
To top it off North hacks into old growth Tasmanian forests as part of its woodchip business, so clearly it has a lot of public issues to deal with.
This brings us to the stunt pulled by the greenies in which 100 shareholders – many of them holding unmarketable parcels – successfully petitioned for an extraordinary general meeting to discuss the proposed development of Jabiluka.
Now North successfully briefed conservative columnists such as Stephen Bartholomeusz from The Age and Andrew Bolt from the Herald Sun who both criticised this tactic by the greenies. I agree with their criticism to a point.
Token shareholders should not be able to call a meeting. If the Federal government is planning to change the law it should be that 100 shareholders each holding more than $1000 worth of shares can petition for an EGM.
Jeffed.com is toying with the idea of pushing for EGMs next year where the issue warrants it. If there was a five per cent shareholder limit – as suggested by some pro-company advocates – it would not have a chance of getting up.
Our institutions are so hopelessly passive when it comes to public agitating that the law should not be changed to prevent 100 genuine small shareholders from taking action and calling an EGM. Just eliminate the ”buy one share” style of activism.
The anti-Jabiluka protestors had their chance at the ERA AGM in Sydney the previous week and then dominated the EGM which started at 9am. It was therefore rather disappointing to have them getting up again at the AGM when we’d already had two meetings to discuss it at great length.
Five or six North shareholders complained about the wood chip business at the AGM which was fair enough because it was not covered at the EGM.
Rather than get up and down five times, I decided to throw all my questions in at once and to gently criticise the greenies for dominating the meeting too much.
Anyway, this is a summary of the Crikey contribution:
Is North really committed to its much-vaunted ”strategic review” of the business given that new CEO Malcolm Broomhead is an internal appointment who might have some emotional baggage to some assets. BHP’s shares have risen much more than North’s this year under cleanskin American CEO Paul Anderson because he is giving it a real shake up.
What is North’s strategic asset mix. We seem to like gold with the Northparkes and Cowal developments in NSW, but then sell our half stake in the Kanowna Bell mine near Kalgoorlie to Delta Gold. We sell our paper business to Amcor four years ago but then hang onto the woodchips and forestry operation. We’ve got out of the Warman pumps business for a good price of $460 million, but then we retain these troubled offshore assets such as the Alumbrera mine in South America and a Swedish base metals operation. If we like these base metals why did we get out of lead-silver-copper big boy Pasminco a few years back.
Lastly, I suggested that the proposed $600 million-plus development of the West Angelas iron ore mine in the Pilbara was dragging behind schedule with Japanese buyers still yet to sign letter-of-intent. Were we looking at a Pilbara iron-ore link up like that unsuccessfully pursued by BHP and Rio Tinto and would we break North up if we believed the sum of the parts were greater than the whole.
Chairman Michael Deeley and CEO Malcolm Broomhead dealt with most of these issues quite well. Basically, they assured shareholders absolutely everything was on the agenda and no stone would be left unturned in getting the company’s asset mix right. Malcolm said some customers were opposed to the BHP-RIO iron-ore merger so staying independent had its advantages.
The meeting at the Melbourne Concert Hall lasted for about two hours and afterwards all the directors were available for a chat. The North board looks pretty good because it is chock full of people with lots of mining experience and many of them are not regular faces on establishment boards around Melbourne.
The two most notable exceptions are former ANZ managing director Don Mercer and former AMP chief executive Ian Salmon, both of whom fell out with their respective board and left earlier than planned. Don is a lovely chap and was very interested to hear of Crikey’s plans to possibly force EGMs at other companies where the institutions have failed to stand up for shareholder rights.
Journalists should go to more AGMs because they are a unique opportunity to meet business movers and shakers after the formalities. Even some of the greenies took the opportunity to meet a few of the mining heavyweights whilst stuffing their faces with free sangers. Not a bad return for buying one North share and it gives some of the ferals a break from their staple diet of lentils.
All up, it was a reasonably interesting meeting. Deeley and Broomhead commented later that at least I asked some questions about the businesses because far too much of the meeting was dominated by the greenies. However, both gave very detailed rundowns on the business issues during the address which reduced the need to ask many questions.
Crikey bought his North shares at $3 a pop and reckons they are still reasonably good value at the current price of $3.18. Malcolm Broomhead and Michael Deeley are a good team and the asset base is also very sound.