The man chosen to run the Packer flagship PBL has some deep links into the Liberal Party. But is he close to future Prime Minister Peter Costello?
Crikey first came across Yates when he was advising the Victorian racing industry in negotiations ahead of the Kennett Government’s Tabcorp float back in 1994. I suspect it was former Crown chairman and Victoria Racing Club committee member Lloyd Williams who suggested the racing industry use Yates after he was one of the key men at Macquarie who put the successful Crown tender together a couple of years earlier. (In total, Macquarie probably made more than $50 million out of Crown during its various transformations.)
The government was finding racing industry negotiations all too hard and Stockdale and Kennett were about to go away on an international financial roadshow for three weeks so they hired Merrill Lynch chairman Mike Tilley (then at Centaurus Corporate Finance) to take over negotiations and told him to do a deal quickly.
Tilley rolled over big time and Yates did one of the best deals of all time and got racing industry distributions up from $120 million a year to $180 million along with a 25 per cent stake in both Tabcorp’s wagering and gaming businesses. He also won them a 30 per cent tax cut as part of the deal making the gambling industry the only one to get any sort of substantial tax assistance from the Kennett government in its first five years.
The NSW racing industry then got Yates to negotiate a similar deal with the Carr government ahead of the NSW TAB float in 1998. Thanks in large part to Yates, Australia now has the best resourced racing industry in the world which is appropriate given that we are obsessed with both gambling and sport.
Ironically, Yates is a regular churchgoer in Hawthorn and is now in charge of one our most sinful companies which includes everything from the world’s biggest casino to a stable of soft-porn magazines.
And Yates was the man brought in at the last minute to advise Telstra to offer $17.50 a share for PBL just 12 months ago. With PBL back below $10 that would have been an absolute scandal and thank god sensible Telstra directors such as deputy chairman John Ralph rolled Ziggy Switkowski and that Packer-sympathising Telstra chairman Bob Mansfield on that one. Given that Yates was in favour of this deal we reckon his PBL options package should be set at $17.50. If only.
After the media had a field day with Packer’s tumbling share price, young James decided he should hit back in an interview with Luke Collins in the Weekend Financial Review.
The thing that really struck Crikey was the boy mogul’s references to “regulatory issues”. But he covered a range of topics about the replacement of Nick Falloon as CEO so check out these quotes:
“The reality is that there are two reasons that this happened,” Packer said. “Strategically, Nick and I didn’t get on as well as we needed to get on and that was just a personality clash. That has been something that’s been evident to people who have known us for a long time and it doesn’t mean that he’s right and I’m wrong. People just need to get along.”
“We may or may not agreed or disagreed on specific items but we agreed on most things. And it was a tough decision because Nick has not done a bad job and I don’t want there to be an impression that Nick has done a bad job. I just think we can do a better job.”
Then there is the issue of why PBL shares are tumbling:
“Media stocks are off,” James told the AFR. “The shares came down within the last month from $13.80 to $10.50 before I did this on Tuesday, and since they’ve gone from $10.50 to $9.80. The market doesn’t like uncertainty, but I think the market’s more concerned with a slowing economy, OzTAM issues and regulatory matters at Crown.”
Then there is another mention of regulatory matters when explaining the job for the PBL CEO.
“The job of CEO of PBL is bringing together the cash flows of the three businesses, managing your capital well, managing the regulatory environment and making sure take advantage of the right opportunities.”
So when PBL is trying to persuade the Bracks Government not to slug Crown with an additional $10 million annual tax burden on its 2500 poker machines, why would they hire a new CEO who has just signed up to be the Treasurer of the Victorian branch of the Liberal Party.
A little birdie inside the Liberal Party has just sent through an email which explains Yates’s background in the Liberal Party and the current machinations.
Yates was a member of the Dandenong branch of the Young Liberals from 1975 (aged 15) to 1985 and rose to become Vice President. During this time he was also on the State Finance Committee. In 1985 he shifted to the Carlton branch of the Adult Liberal Party and held the post of “Membership officer”. In 1996, he quit Carlton and signed up with the Melbourne branch for a three year stint, including a position on the Electorate Committee. Then in 2000 he shifted out to the East Hawthorn branch where he became Treasurer. Being a monied Liberal the Yates lad has been a member of the 500 Club since 1988 which is not long after John Elliott formed it.
We hear that James Packer is furious that Yates has taken up the post of Sate Treasurer, even if only for a month or two. A Liberal emailer wrote as follows: “Apparently James Packer is furious at Yates not withdrawing from the position before State Council – with all his investments in Victoria south of the Yarra, the last thing he needs is his CEO being Treasurer of the Opposition organisational wing. The ALP are much better haters than the Liberals so you don’t want to get off-side so quickly or it will cost you a cool 1/4 mill to get back in favour.”
But hasn’t PBL already donated $100,000 to the Victorian Labor Party to get back in favour?
Yates was asked to take on the Treasurer’s role by state Liberal President Ian Carson when the former Treasurer Gil Hoskins (of Sausage and National Mutual fame) decided that his corporate credentials weren’t raking in the dollars.
Carson and fellow Macquarie Banker Alan Stockdale put a lot of pressure on Yates to stick around for a month because it would look really bad to have the fundraising chair empty. His half-way house decision was to stay for a month without doing any direct fund-raising for the Libs. Macquarie insiders say that this is typical of Yates’s indecisiveness.
Is Yates close to Costello?
Federal Treasurer Peter Costello was most annoyed when Gil Hoskins was appointed party Treasurer in Victoria so it begs the question as to whether he and Peter Yates are quite close. They would have both joined the party around the same time and must, you would presume, know each other quite well. Given his focus on managing the regulatory arrangement, could James Packer have made a long-term strategic political choice for his next CEO. Could former Packer door-opener and Costello’s best friend Michael Kroger have been instrumental in the choice. We’ve heard nothing concrete on these issues but the Packers are long term political planners to in watching them you need to look for these sorts of angles.
Tumbling Packer wealth
Lastly, we flagged on radio last week that Westfield’s Frank Lowy could yet surpass Kerry Packer as Australia’s richest man based on some recent developments. The Packers have dropped plenty in ecorp, One.tel and Hoyts over the past year and with the US dollar tumbling and PBL shares almost halving from their peak, the empire’s value must surely be well below the $8.2 billion BRW said last year. And with Frank Lowy having much of his personal wealth tied up in US shopping centres, he net position must be well clear of $3 billion based on the recent strong performance of his Westfield empire.