Tony Shepherd, who is chairman of the GWS Giants, with player Callan Ward. Picture: Phil Hillyard
Tony Shepherd, who is chairman of the GWS Giants, with player Callan Ward. Picture: Phil Hillyard

GrainCorp buyout strategy has roots in 1980s

Spend a few billion dollars to buy a business - actually, also a critically important national asset - and then find somebody to be its owners.

That "somebody" will be investors, big and small.

That's essentially what the Tony Shepherd-Chris Craddock Long-Term Asset Partners (LTAP) vehicle is doing with its $2.4 billion bid to buy GrainCorp.

Craddock, who's a former investment banker and asset manager, is the brains behind and driver of LTAP.

He went to Shepherd to give his "good idea" practical grunt.

Shepherd is a long-time public servant-turned-business exec with the Transfield infrastructure group.

He has found a subsequent second life as a public policy player, kicking off with the presidency of the Business Council and AFL-aficionado as chairman of Greater Western Sydney.

He's gathered the group which has given practical credibility to Craddock's play, with the combination critical to getting the $3.6 billion, mostly from Goldman Sachs, to fund first the proposed takeover and then the subsequent GrainCorp operations.

Ironically - but entirely coincidentally, and with no practical relevance to either the bid or the way it will be dealt with and play out - his counterpart chairman of GrainCorp, Graham Bradley, was Shepherd's immediate predecessor as BCA president.

Tony Shepherd, who is chairman of the GWS Giants, with player Callan Ward. Picture: Phil Hillyard
Tony Shepherd, who is chairman of the GWS Giants, with player Callan Ward. Picture: Phil Hillyard

In a broad sense what Craddock and Shepherd are trying to do is a further advancement on what Ian Silk and his AusSuper industry super fund are trying to do with a number of plays of which the most determined has been private hospitals owner Healthscope.

And both have even longer dated roots in what one-time ACTU heavy-turned-entrepreneur Garry Weaven pioneered with his Industry Funds Services operation in the early 1990s and its push to "corner the market" in the early stages of the wind-energy industry.

Weaven as assistant ACTU secretary and Bill Kelty as secretary joined in the 1980s with then-treasurer Paul Keating to create compulsory super as a wages trade-off.

That led to the industry super funds and the rest, would be history.

The big step Weaven took was to become the "go-to guy" for anyone wanting to invest in renewable energy and, in particular, wind.

Investment in wind has of course widened dramatically to many other main-chancers since those IFS days and his move on to Industry Funds Management.

GrainCorp chairman Graham Bradley.
GrainCorp chairman Graham Bradley.

What Silk has been trying to do 20 years later is to similarly become the "go-to guy" for anyone wanting to invest in a key asset like private hospitals by joining with a hedge fund to take Healthscope private.

Now we see a similar play with GrainCorp. It's a step further because Silk's AusSuper would be an upfront (partial) owner of Healthscope were it to succeed (which is not looking so likely with the intervention of a second bidder).

The difference with LTAP is that it doesn't have an existing long-term ownership base for GrainCorp. First it'll buy GrainCorp - effectively as a bridge-owner - and then attract the long-term owners, such as, especially, super funds.

While doing this it will also, critically, refine the actual mix of financial instruments for both the long-term ownership and the way the business is funded. By doing it this way, LTAP has maximum flexibility in tailoring the whole package to maximise the return and to customise for a variety of investors and investment products and asset classes.

Now, the first question that the play raises is exactly the same as what happened with AusSuper at Healthscope.

GrainCorp’s loading terminal at Corio, near Geelong. Picture Yuri Kouzmin
GrainCorp’s loading terminal at Corio, near Geelong. Picture Yuri Kouzmin

Having rung the bell on the double-level appeal of GrainCorp - both its intrinsic value and as a major and almost irreplaceable or even replicable infrastructure asset, its long-term investment appeal - does this ring the bell on a competitive race?

This goes to the two bigger and broader issues, which this play and a host of other attempted or successful infrastructure acquisitions highlight, while also posing really fundamental public policy questions.

First, Australian owners dramatically undervalue our assets in a global investment environment where there are literally trillions of dollars looking for safe, long-term good investments.

There are none better than most of Australia's.

Crudely, to me this means if Craddock is prepared to pay $2.4 billion, we - and by that I mean Australia Inc - should be asking for $4.8 billion.

Better still "we" shouldn't be selling. At least with LTAP "we" would be selling largely to another form of "we" - maybe even the same "we" as in repackaged super funds.

That's the second big question: how many of these critical infrastructure assets that all used to be either publicly or producer-owned - GrainCorp is critical to getting a big slice of our grain crop into the market - should we allow to be foreign-owned?

Both are wrapped together in the short-termism that is the all-corroding rot festering within our super and funds-management industries.

The underlying ethic is to grab the profit and move on to the next returns-boosting play.


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Just as his election in November 2016 drove the most extraordinary Wall St run ever, adding trillions to global wealth.