The Australian’s editor-in-chief Chris Mitchell has today published a cracking exclusive story about the godfather of his son – but it was buried on page seven.

Mitchell has poached most of the top talent from The Courier-Mail, making The Australian is well-placed on Queensland political stories, and this is how Sean Parnell’s intriguing tale began:

Therese Rein, wife of federal Labor leader Kevin Rudd, bought shares with a market value of $5.2 million from the estate of her dead business partner for a tenth of their worth.

Pre-emptive rights in takeovers and upon death are not unusual, but the startling aspect of this arrangement is that it was entered into after the much older Edwards, one-time nun and physiotherapist, who died of cancer and renal failure, fell ill. No wonder her estate tried to get out of it.

KPMG valued Edwards’s 5200 shares in Ingeus at $5.2 million in 2004 but the Rudds picked them up for just $520,000 last month after enforcing an agreement signed in May 1998 – five months before Rudd entered Federal Parliament.

A six-month court battle was only resolved last month and Therese Rein confirmed the original agreement was strictly followed. It’s not clear if any quarter was given on the question of the legal bills.

This means the Rudds have decided to profitably increase their stake in Ingeus, the third largest job network provider to the Federal Government, after Kevin became Opposition Leader when some observers would suggest they should have been doing the reverse and selling out.

While Edwards would have picked up an equivalent bargain if Rein had died first, this was highly unlikely given that our wannabe first lady was 27 years younger and in good health.

It would be fascinating to know what dividend policy Ingeus adopted on its reported $8.8 million profit in 2005-06 and over the previous decade. Knowing that pre-emptive rights to pick up discounted shares existed, the Rudds had a financial incentive to retain as much profit in the company as possible.

Therese Rein now own 13,000 Ingeus shares, alongside nine other shareholders with undisclosed holdings. Given the extraordinary global growth of the operation, the stake could be worth more than $20 million.

Based on an earnings multiple of less than 12, a business valuation of more than $100 million is not unreasonable for an operation with revenues of $175 million and 1300 staff. However, it all swings on what percentage the Rudds now control and whether such a people-intensive, government-dependent operation is readily saleable without the only surviving founder remaining CEO.

Peter Fray

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