The current takeover, currency and stockmarket boom is creating all sorts of records and one of them will be triggered if Perpetual decides to accept Cemex’s $18.7 billion cash takeover bid for booming building materials group Rinker.
Perpetual manages almost $40 billion and would receive a staggering $1.9 billion in cash if it accepts the Cemex bid for its 10.32% stake. Never before in the history of Australian funds management has one investor received such a cash deluge from a takeover bid.
Forget about Premier Investments pocketing $1.15 billion from the sale of its 5.9% stake in Coles Myer to Wesfarmers, no Australian fund has ever received $1 billion, let alone almost $2 billion.
As Andrew Sisson’s Balanced Equity Management explained about the reasons for retaining its 4% stake in Qantas, the challenge for Perpetual is to redeploy this cash into an investment that will equal the returns delivered by Rinker.
Funds management is a winner-take-all industry based on past performance and the original Perpetual decision to invest heavily in CSR dates back to Peter Morgan’s days, although John Sevior’s team lifted the stake from 9.54% to 10.55% in October 2002 just days after Morgan left to set up 452 Capital.
Sevior’s team wisely stuck with Rinker after the March 2003 demerger from CSR and enjoyed seeing their Rinker shares surge from less than $500 million to yesterday’s takeover valuation of $1.9 billion. This $1.4 billion Rinker capital gain on its own more than explains Perpetual’s out-performance of its rivals over the past four years.
Quarries, concrete, asphalt and cement isn’t exactly sexy, but Rinker has been one of the great Australian success stories and the largesse is being shared around. Chief executive David Clarke deserves every one of the $40 million-plus dollars that will come from the Mexican predators.
Even PR and investors relations chief Debra Stirling, who came to prominence defending Coles Myer through the Solly Lew Yannon scandal in the mid-1990s, will pocket a tasty $5 million.
Not bad for a former AAP scribbler and surely another record pay day for an in-house flak courtesy of this market.