Veteran corporate raider Sir Ron Brierley included a warning in his company’s latest chairman’s letter – that although there was a good outlook for 2018, “we accept the inevitability of a market correction at some stage.”
Sir Ron, who turns 81 in August, will have seen a few market corrections during his time since starting R.A. Brierley Investments in 1961 with no capital.
His latest listed vehicle, Australian head-quartered Mercantile Investment Company, is small in comparison to the glory days of listed Brierly Investments but continues his active investment style.
Its most recent takeover bid was for half the shares it didn’t own in West Australian mining exploration company Bauxite Resources (BRL), which had $A16.2 million in cash. Sir Ron, known for his forthright style, said in the offer that “after 10 years unsuccessfully searching for bauxite, lithium and silica sands, it was time to call it a halt.”
There has been a bit of argy-bargy since including the Bauxite board offering a 5Ac per share capital return and shareholders rejecting Mercantile’s revised offer. For its part, Mercantile claimed that decision wasn’t binding and extended its offer to the end of June.
It has also quietly amassed a 19.9% stake in Australian mortgage lender and wealth manager Yellow Brick Road, apparently banking on a takeover offer arising in the near future.
Two other takeover offers the company made during 2017 – for cashbox EZA and MHM Metals – were unsuccessful.
This side of the Tasman
The only New Zealand investment is a 19.9% stake Mercantile and associated company Sandon Capital hold in national furniture and appliance retailer Smiths City, just below the threshold for a compulsory takeover offer.
The Smiths board announced in January 2018 a share buyback scheme over the following 12 months of up to 5% of its capital, widely seen as a defensive move against a cheap takeover by Sir Ron. But Smiths City chief executive Roy Campbell says the company “hasn’t chosen to do” the share buyback. The company’s shares have slumped markedly in the past few month since disappointing the market with an earnings downgrade in April. In May it was ordered by the Employment Court to pay workers for company meetings they had been forced to attend outside working hours.
In the 2017 annual report Sir Ron says Mercentile “made a small profit” on its successful late 2016 takeover and windup of Wellington Merchants, once known as iconic Wellington retailer Kirkcaldie & Stains.
Mercantile, in which he holds a 44% stake, is sitting on an $A17.7m cash balance which gives it plenty of capacity should suitable investment opportunities arise. The chairman regularly makes personal loans to the company as well when cash is needed for takeovers.
Sir Ron, who has lived for decades in Sydney, is one of the world’s largest buyers and sellers of stamps, a hobby he picked up when attending Wellington College in his youth. In recent years he’s been progressively selling off his Great Britain and British empire collection (up to the Part V111 sale by March 2018). He is recognised in philatelist circles by the name Lionheart, which is the same name as his luxury yacht.
He’s also a huge cricket fan beginning his association at the Basin, the home of Cricket Wellington, in 1952 as a schoolboy scoreboard attendant. A pavilion at the ground has been named after him.
Sir Ron was knighted in 1988 for his services to business.