In the days after Kerry Packer’s death, Crikey published a detailed analysis of the family’s 20 year foray into the chemical business, pointing out that it had initially provided fantastic returns before turning into a debacle over the past five years.
We concluded as follows about family’s residual 7% stake in embattled global chemical giant Huntsman: “Don’t be surprised if it is one of the first things that James Packer sells because it has been a sorry few years for the family’s chemical plays.”
And so it was. The AFR this morning took a walk through the ASIC filings of James Packer’s private company, Consolidated Press, and revealed that the chemical investment has indeed been jettisoned.
The Packer chemical play is little known but very interesting. Having received $800 million in cash from Alan Bond in 1987, Packer ploughed $130 million into buying Monsanto’s Australian’s operations, which were renamed Chemplex Australia and based around its West Footscray plant.
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Given the giant explosion at Coode Island in 1991, this was always going to be a contentious investment and Packer preferred as little public exposure as possible and eventually took a $66 million write down on the plant thanks in part to tough regulations.
In what was certainly seen as an odd alliance at the time, Packer sold half the Chemplex Australia business to Salt Lake City-based Mormon Jon Huntsman for $70 million in 1993. The two then joined up later that year to buy Texaco’s US chemicals business for $US1 billion, although Packer’s original 50% stake in this venture was subsequently cut to 20% or $US200 million. In December 1998 Huntsman Australia also purchased Orica’s surfactants business in Botany for $155 million.
By 2001, the Huntsman business had turnover of almost $20 billion, but it ended up in a workout situation and the poor old Packers held 14% of the bonds which were collectively written down and given 49% of the equity in a massive recapitalisation.
The SMH reported in 2003 that the Packers had $600 million on the line, but the residual 7% equity stake was only worth $US131 million when Huntsman refloated in February 2005.
The resources boom and the revenge of the old economy hasn’t saved Huntsman as this graph from the past 12 months shows, but it is not known exactly when the Packers disposed of their residual 7% stake.
With chemicals gone, the last troublesome business that James needs to clean up is the large pastoral operation which is saddled with a whopping $745 million debt. James’ mates at Macquarie Bank appear to be positioning themselves to save the day with a new specialist beef fund.