Lord of the deals

by Graeme Hunt / 14 August, 2010
He's New Zealand's richest man but most of us know little about him. Now he's on a mission to shake up the global packaging industry.

Graeme Hart defies the norms of identity. He's easily the richest person in ­Australasia with personal wealth of at least $6 billion, yet few people outside the business community know how he earns his money or even what he looks like.

Since 1992 I have written periodically about the enigma that is Graeme Richard Hart and his balls-of-steel business deals but have met him only twice. That's twice more than many journalists, because rather than court publicity, Hart prefers to court bankers - something he's amazingly good at.

His debt-leveraged deals do create news, of course, most recently his attempt to reshape the global packaging industry. This led the Economist in May to describe him as a "little-known investor from New Zealand ... stirring up the packaging business". The publication went on to note that Hart's Auckland-domiciled Rank Group was "one of the very few Kiwi businesses to operate on a global scale" (another being dairy giant Fonterra ­Co-operative Group).

Hart's rise from the then working-class Mt Roskill Grammar School in Auckland's postwar state-house belt began when he left school at 16 - pretty common for the early 1970s - and tried his hand at panel beating and tow-truck driving. Next he set up Harts Printing Co where he developed his master plan to acquire and manage stable businesses as decentralised strategic units.

He floated his investment company Rank Group on the New Zealand Stock Exchange in 1987 and three years later was awarded an MBA from the ­University of Otago, with a dissertation reputedly on the rise of Rank using leveraged buyouts. It is no surprise, then, that Rank drives his business activities today.

Hart made money in the party-hire business before buying Wormald Safety in 1989, the Government Printing Office at a knock-down price in 1990 and stationery supplier and bookseller Whitcoulls the following year. This earned Rank the title of a market leader in the gloom of post-sharemarket crash New Zealand. It was the start of a roller-coaster ride that has yet to run its course.

Typically, Hart's acquisitions - mostly in mature industries - would be ruthlessly squeezed of costs, made profitable and sold off for hefty gains. Trading was always part of his game. The process resulted in some spills along the way, none more so than in 1998 when Rank's minority stake in Sydney-based spice group Burns Philp & Co came close to vanishing before making a spectacular recovery and giving Rank the chance (which it took) to control the company.

Rank acquired the sloth-like food business Goodman Fielder in 2003 and the mismanaged forestry giant Carter Holt Harvey in 2005 amid the usual ­accusations that Hart was little more than a carpet­bagger. But few of his critics thanked him for turning the businesses around or returning the former New Zealand-owned assets to Kiwi ownership.

The deals, like those before, were challenging and had their share of drama. Hart was described variously as a "gambler" and a "huge risk-taker", but little attention was paid to his business acumen or iron-clad determination to succeed. His revenge was not to engage in a media slanging-match - he has little patience with journalists - but to prove the doomsayers wrong by the sheer audacity of his business success.

It would be tempting to compare Hart to Sir Ron Brierley in his earlier days or to Guinness Peat Group, and certainly there are similarities in the ability of all three to unlock value in poorly performing companies. But Hart's Rank Group is not an all-purpose investment company looking for a buck but a hands-on player seeking to reshape specific industries (for many more bucks) across national borders.

That's what makes Hart so interesting to foreign observers; he can't be easily defined because he is neither an establishment figure nor a classic takeover merchant and is absent from the usual business networks.

Hart was a member of the New Zealand Business Roundtable in the 1990s but executive director Roger Kerr says his involvement was passive and he has shown no interest in re-engaging. He is not known to be an active philanthropist in New Zealand.

More recently, Hart was part of a 15-member King's College parent group that sought to do something politically incorrect: organise an after-ball function at the college where his son, Harrison, was a King's student. Hart would not have welcomed the publicity.

A story doing the rounds highlights Hart's apparent reclusiveness. Supposedly when the Prime Minister phoned his Sydney office, Hart said to his receptionist, "Ask him what he wants." The story is almost certainly an urban myth but it suggests Hart is a latter-day Howard Hughes. He's not, and although a hard taskmaster, he is generally polite and courteous and does have a sense of humour. He's just very private.

Hart spends much of his time in Sydney, but his home is a $22 million mansion in Glendowie in Auckland's eastern suburbs and he has a spectacular property at Waiheke Island's Church Bay, a 58m superyacht, Ulysses, and, according to his Wikipedia entry, a private jet.

He's unlikely to appear in the Herald on Sunday celebrity pages or at some hot new bar at the Viaduct on Auckland's waterfront. Even on Waiheke Island, his retreat, he keeps a low profile. "I've never seen him at any of the events on the island," a Waiheke socialite told me. "He's never there."

Occasionally, Hart's wife of 25 years, Robyn (née Hatton), makes the celebrity news, and years ago Hart's step­daughter, Gretchen, married Duncan Hawkesby, son of former TV newsreader-turned Waiheke winegrower John Hawkesby (and soon-to-be brother-in-law of Newstalk ZB breakfast host Mike Hosking). But that's about as good as it gets.

Hart's enjoyment of the good life is well known - he lives comfortably, dives regularly and has reputedly bought the 16ha Fijian island of Eori - but a public showman he is not. His real love is business - right now, the food-packaging business. This is not a sexy industry but a potential gold mine if Hart can shape it the way he wants.

If market rumours are correct, Rank Group is seeking to acquire US packaging company Pactiv Corporation in a bid to challenge Tetra Laval's food-packaging dominance. Among Tetra Laval's varied operations, the Tetra Pak business is the world leader in liquid food-processing and packaging.

What is not in doubt is that Hart is laying the groundwork for something big after shelling out US$2.7 billion for aluminium producer Alcoa's packaging and consumer group in 2008. He spun off parts of the business - mostly aluminium foil and plastic closures - restructured it with plant shutdowns and hefty job losses, and renamed it Reynolds Packaging Group. It is now the flagship for Rank's varied and far-flung packaging interests.

From late 2009 Hart started bundling the packaging groups Rank already owned into the Reynolds stable: Swiss drinks carton manufacturer SIB and ­Indianapolis-based plastic bottle cap manufacturer Closure Systems Inter­national. Courtesy of US$1.75 million of debt Hart is raising on Reynolds Group Holdings, he hopes to add further Rank assets to the mix: Memphis-based drinks packager Evergreen Packaging and even the Whakatane Paper Mill (the latter is part of Rank-controlled Carter Holt Harvey).

The end-game in this has to be a food-packaging group capable of challenging Tetra Pak. Hart wouldn't be interested if the challenge were anything less. That he can even consider this when the global economy is still weak is testimony to more than blatant deal-making. It is about Hart himself - a rare breed of New Zealander who has made it in business overseas and survived as a member of New Zealand's oft-maligned and oft-troubled nouveau riche.

The Economist predicts a giant Reynolds would give Hart the critical mass to change the nature of the food-packaging industry. Given Hart's success rate to date, he is capable of pulling it off. And if he does succeed, he's more likely to be the toast of the Australians than his fellow Kiwis. He's already been elevated to the status of Australasian or Anzac - not as a put-down but out of genuine Australian respect for him.

The Aussies have seen Kiwi wide boys come and go - Ariadne's Bruce Judge and Equiticorp's Allan Hawkins (the latter jailed for fraud) are perhaps the worst - but Hart is nothing like this breed. According to an interview with Australian journalist James Kirby in 2003, he's a driven and focused entrepreneur. "I don't want to seem arrogant and distant," Hart told Kirby then. "I want to be seen as responsible. I want to build companies with stable and predictable cash flows."

Unlike Hawkins, who was a cold fish even at the peak of his career, Hart is charismatic. He might no longer exhibit the boyish good looks of those early days when he gobbled up the Government Printing Office and Whitcoulls, but he has aged gracefully and retained that billion-dollar smile.

At 55 - he was born on June 6, 1955 - Hart has lost none of his zest for business success. He has become bolder over time and yet hasn't changed his method of doing business. He surrounds himself with a small and loyal team, and hates corporate bureaucracy, as he proved in 2003 when he made immediate cost savings of A$25 million by sacking 300 staff in Goodman Fielder's head office - mostly lawyers, accountants and executives. He is highly strategic, he isn't taken in by investment fads and he doesn't talk to the market unless he has to. From an investment perspective, this makes him more attractive than ever.

The Economist, no great friend of business these days, has faith in him. It noted in May that although leveraged buyouts had fallen from grace, Hart had held his own. "Mr Hart weathered the storm better than most, suffering none of the breaches of debt covenants or defaults that have afflicted other financial wizards," it said. As for Hart's latest venture, the Economist added: "Packaging, although not normally exciting, can certainly be ­lucrative."

New Zealanders are less supportive of Hart and might never understand him, but he has been too long and too successful in business to be ignored. If he is denied recognition as a Great Kiwi - something he surely deserves - he can at least be a Great Australasian or a Great Anzac, and eventually, whether he likes it or not, become a Great Australian.

The Aussies are already counting him, as they did Phar Lap and Crowded House, as one of their own.

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