Fran O’Sullivan casts a skeptical eye at Sir Michael Fay’s bid to keep the Crafer farms in ‘New Zealand hands’ (Fay is a tax resident of Switzerland), and reviews some not-very-ancient history:
The most interesting example of the influence game that I can recall was with the September 1990 sale of Telecom to the US “Baby Bells” consortium for $4.25 billion. Business readers will recall that Fay Richwhite and Co (the merchant bank controlled by Sir Michael and David Richwhite) and the Freightways partners Alan Gibbs and Trevor Farmer effectively pulled the deal together for Bell Atlantic and Ameritech and emerged with minor holdings themselves after the share float.
The Baby Bells consortium was not the highest bidder when the then Labour Government put 49.9 per cent of Telecom on the block. The top bid was said to have come from Australia’s Optus.
But as former Telecom chief executive Peter Troughton revealed in a National Business Review article in 2006, a few days before the final bids were due, “I was informed that a non-conforming bid would be submitted, and that the government might be prepared to accept it.”
Other bidders were given just 24 hours to match the Baby Bells’ bid.
The NBR article also reported former Telecom company secretary Martin Wylie saying the change in the rules of the sale was a bad signal. “It was a Mickey Mouse way of doing things. I was somewhat surprised that a transaction of that size would be treated on that basis.” There was more besides including the failure to put appropriate conditions around the sale of a monopoly network.
Fay has recently banged on about the lack of transparency in the OIO’s handling of the Pengxin application.
But that pales in comparison to the extraordinary manoeuvring over the Telecom sale. The rival bidders were treated appallingly. Optus was outraged that the Government switched its sales plans within days of the announcement. But it did not file for a judicial review of the Government’s decision. It just accepted this was the way business was done under the second (sic, fourth) Labour Government.
Also worth remembering what happened after they bought Telecom. The company was loaded up with debt, which the new owners then paid to themselves as dividends and then flicked the heavily indebted company on, having made a fortune. Every developed country in the world enjoyed a nineties dotcom boom – except us, because we didn’t have the infrastructure, because our telecommunications monopoly couldn’t afford it.
Fay did the same thing with our rail network. There’s no reason to believe he won’t do exactly the same thing here, and that the farms won’t be sold piecemeal to China within a year of Fay purchasing them and gearing them for more debt.