Two years ago, the appointment of Richard Goyder as the head of Wesfarmers Ltd brought a fresh round of the close inspection that has dogged the conglomerate for almost two decades.
Two years ago, the appointment of Richard Goyder as the head of Wesfarmers Ltd brought a fresh round of the close inspection that has dogged the conglomerate for almost two decades.
Replacing Michael Chaney, the man who had built Wesfarmers into a national corporate icon, Mr Goyder had big shoes to fill; and there were plenty of people questioning whether he had the character to do so.
Like slow points in his predecessor’s 12-year career at the helm of Wesfarmers, Mr Goyder was watched closely to see when he would make a big move.
The rising tide of private equity gave those who doubted him fresh fuel. These players had cheaper capital and would always be able to outbid a listed company, it was thought.
Mr Goyder and his team found a way, though.
They brought private equity in on the deal as partners in February with a bid for retail giant Coles Ltd in what was seen then as an audacious move.
The evaporation of private equity as both a rival and then a partner makes this week’s acceptance by the Coles board of a stand-alone $22 billion offer by Wesfarmers even more staggering.
As the biggest takeover in Australian history, it will no doubt be cited as a major point in history of Wesfarmers and corporate Western Australia.
If it all goes to plan, Mr Goyder will have created a company worth between $35 billion and $40 billion, more than double the Perth-headquartered group’s current $16 billion market capitalisation.
Although unrelated to the current boom in WA, the takeover of Coles may finally mark a point when Perth’s corporate base is taken seriously on a national level.
Of course, WA companies have attempted audacious things before, especially in the 1980s.
The track record of corporate raiders such as Alan Bond and Robert Holmes a Court left the state out in the cold for a long time.
But the circumstances are not the same as now. Wesfarmers has a track record of financial focus in both its transactions and operations.
Speaking after the Coles board acceptance this week, Mr Goyder said he did not think the conglomerate had paid too much for the retailer.
“We are a very financially disciplined company renowned for the way we do rigorous evaluation of anything we might do,” he said.
“We have evaluated this on many fronts…we are confident that we can add value for our shareholders over time.”
What’s more, it is buying a business it believes is simply badly managed rather than broken, very much like the acquisition of Howard Smith Ltd, which allowed it to incorporate the BBC and Hardware House brands into its own Bunnings empire.
Mr Goyder stressed that he did not believe Wesfarmers was buying a distressed business.
“I think Coles is in a very strong market position and I think there are things that can be done to improve the business,” he said.
“We want to reverse the trend on market share and we want to do that as quickly as we can.”
Audacious as the plan is, it is not a case of pillaging assets and withdrawing to the isolation of Perth with the protection of the Nullarbor, as seemed prevalent in the 1980s.
While Coles will be owned by a WA company there are no plans to drag the retailer out of its Melbourne base, Mr Goyder said.
“We have highly decentralised decision making,” he said.
“Bunnings is based in Melbourne, our coal business is in Brisbane, our industrial and safety and insurance business is in Sydney. We happen to have a corporate office with about 120 people based in Perth.”
