It’s been a couple of weeks since the sad death of AFL President and former Spotless managing director Ron Evans. Ron was widely lauded as a man of great integrity and he certainly did a fine job steering the AFL since taking over in 1998.
Whilst his time at Spotless is well known, few people realise that Ron ended up making more money out of his hospital play, Healthscope. Loyal to the last, Ron actually died in a Healthscope hospital, Melbourne Private, and insisted that he not be given any special treatment.
Spotless became quite an empire with 28,000 employees around the world. However, in financial terms it has struggled in recent years, coinciding with a period when its very ordinary corporate governance standards started to improve.
Ron and his long-time business partner Brian Blythe eschewed the concept of having a majority of independent directors for many years and were paying themselves excessive $2 million-plus salaries almost a decade ago.
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The Spotless incentive scheme was uniquely generous whereby directors were given interest free loans to buy shares and personally pocketed the dividend payments.
This was fine whilst the good performance lasted but the company hit the wall in 2001 when the stock peaked at $8 before they bought UK garment supplier and packaging systems company Braitrim Holdings for $350 million and raised $72.5 million in fresh equity at $7.25 a share. The stock is trading at $4.57 today.
Whilst Spotless has struggled, Ron’s Healthscope play makes him quite unique in corporate Australia because he’s ridden the Howard Government’s spending splurge on health to build Australia’s second biggest hospital company which is now capitalised at $1.32 billion versus just $989 million for Spotless.
Ron’s 6.4% Spotless stake is worth $60 million, yet his 8.15% stake in Healthscope is worth $110 million and the market is already speculating about what will happen to them given that Ron is the largest shareholder.
I’m not aware of another public company CEO who has simultaneously invested in another listed company and built a second fortune serving as a non-executive director. The Healthscope opportunity could potentially have gone to Spotless.
Healthscope CEO Brian Dixon used to run the Spotless healthcare division and then received some financial backing from Ron when he defected to the boutique hospital provider.
Ron initially paid about 60c for his Healthscope shares and they had halved in value when he and Linda Nicholls, who he new from their days on the Australia Post board together, joined the board in 2000.
Ever since then, it’s been a great turnaround story for which Ron has received little public credit.