Roberts Ltd and Webster Ltd are two of Tasmania’s best known businesses and
are two of only a handful of listed companies left in the state. Both have
operated for many years as traditional pastoral companies, trading in wool and
livestock, real estate and providing rural merchandise and finance to the
farming community. Webster started in 1831, only 28 years after the settlement
of Van Diemen’s Land, and is claimed to be the fourth oldest business in
Australia.

Ten years ago, Roberts and Webster were very similar
businesses. They were fierce competitors and generating comparable sales,
profits and dividends for their shareholders. Today, the companies are vastly
different operations and producing returns at opposite ends of the scale for
their owners. Both companies are also now takeover targets, but for different
reasons.

Roberts has stuck to its traditional business and over the last 10 years has
consistently increased operating profit and dividends. Profit before tax has
risen from around $2 million to $14 million before tax and dividends are being
paid out at 80% of net profit. The Roberts business has expanded interstate with
operations in Victoria, South Australia and Western Australia.

The business has
been such a resounding success story that it became the target for a friendly
takeover offer from the Australian Wheat Board in June this year. AWB offered
$9.50 a share but after a recent 4 for 1 split, Roberts are currently trading at
the equivalent of nearly $11.00. At this share price the business is capitalised
at approximately $140 million.

Webster has been a very different story. In 1996 a company called Ossa
Limited purchased nearly 20% of Webster. The major shareholder of that
company is Rod Roberts, a merchant banker from Sydney who then pushed for board
representation and became Managing Director in October 96. In October 1997 Rod
engineered a spill of the Webster Board and obtained effective control of the
company. In the 1999 Annual Report, Rod’s Managing Director’s review makes the
following claim.

“Over the past two years Webster has transformed itself
from being a traditional pastoral company, with a heavy reliance on agency
income from livestock, wool and real estate, to being a food company with
emphasis on intensive agribusiness and, more recently aquaculture.”

The problem is that since 1999 Webster Limited has not made an operating
profit or paid a dividend to its shareholders. Webster has only continued to
survive as an entity by selling off viable parts of the business (some of it to
Roberts Ltd) to get a cash injection.

The last profitable division to be sold off was Aquatas which will provide a
one off abnormal profit of $11.7 million via a capital gain for the 2005
financial year. Webster’s share price has slumped to as low as 59 cents
recently which capitalises the company at approximately $35 million.

Webster is also a takeover target, with both Elders and corporate raider
Guiness Peat Group (GPG) each holding around 20% of the stock. One theory is
that Webster is about to be broken up between the two major
shareholders. Elders can absorb what remains of the traditional rural
business, and they sell off the transport and industrial division.

GPG will end
up with the shares in Atlantic salmon producer Tassal that Webster received as
part payment for their Aquatas business. GPG are currently a 10% shareholder in
Tassal and the Webster 25% stake may give them effective control.

Two Tasmanian icon companies have been taken down very different
paths. Roberts is positioned to survive and grow into the future, although it
has become a takeover target only because it is such an attractive strongly
performing business.

Webster, however, has been a disaster and the merchant
banker at the helm has overseen the loss of most of the shareholder value in
that company. Webster will almost certainly be broken up and a company that
was founded in 1831 with a huge heritage in Tasmania will disappear.

Peter Fray

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