International News

Pacific Brands is a classic of the golden era of private equity.

Bought out of the foundering conglomerate Pacific Dunlop for $730 million in 2001, its new private equity owners ripped out $100 million in cash, geared it up with mountains of debt and sold it back to the stock market in early 2004. They banked $1 billion from the public float.

It was a slick operation all round. The privateers from CVC Asia Pacific and Catalyst Investment Managers, and their investment bankers from Macquarie Bank who teed-up the float, slapped together an impressive board of directors. Fat with other peoples' money to spend, the big superfunds bought it with their ears pinned back, even though it had been loaded with debt to the tune of 3.5 times its earnings (before interest, tax and so on).

The success of the deal was not down to paper shuffling alone. The privateers had turned the manufacturer around. They fixed the supply side. They breathed new life into the brands. Blue collar marques such as Chesty Bonds and King Gee turned bogan into chic.

The irony won't be lost on the 1,850 real blue collar types who are losing their jobs to China - in a company which deployed dinkum Aussie multimillionaire Pat Rafter and billionaire Sarah Murdoch to spruik its products.

Golden era

From lawyers to bankers, management consultants to celebrities, private equiteers to company directors, PacBrands executives to independent experts - rich and super-rich alike - fed high on the hog on this old Aussie manufacturer and its employee battlers.

The brutal reality is that it is ten times cheaper to make a singlet or a pair of undies in China than it is in Australia. ''Offshoring'' of jobs is inevitable and PacBrands merely a high-profile case.

The fee-fest, the brand profiles and the magnitude of the job losses has made Pacific Brands a media event.

For the private equiteers, it was a beautiful thing. Almost any business sold in 2004 to 2006 delivered outstanding returns. This was the golden era and PacBrands was the quintessential private equity play - a three-year turnaround and an internal rate of return (IRR) of 141%.

There were plenty of ''three-bangers'' or threefold returns during these years. Think Just Group privatisation and refloat, the float of another Pacific Dunlop business Repco, the float of JB Hi-Fi, the purchase of Bradken from Smorgon Steel followed by its IPO, the privatisation of Ausdoc followed by breakup of the business.

These deals shone thanks to the buoyant economy and multiple expansion, that is, buying an unloved retail business on 4-5x EBITDA, sprucing it up and bringing it back to the share market on a multiple of 8x. As the great bull market progressed, private equity fund IRRs of 65%-plus were won by most of the players.

Insiders say some 40-odd private equity executives are swaggering around Sydney - it is mostly a Sydney game - each on average $20 million richer for the cause.

Just Jeans represented an IRR of 157%. Like JB Hi Fi it was also a winner for shareholders.

Momentum

It is always an interesting exercise to contemplate the economic benefit, or social benefit for that matter, of all this dealing. Now that Eastern suburbs and Palm Beach property prices are coming off the boil, has the money simply gone? The PacBrands jobs have gone, gone to China. The proceeds of the paper shuffling may have gone too, in luxury holidays, renovations and assorted assets now worth less than they once were.

During the golden era, major international private equity firms began to descend on Australia.

KKR and Carlyle Group among others both set up shop. The other trend was a mushrooming of domestic private equity managers. The superannuation industry was a buyer, a big supporter and most super funds have exposure to private equity funds.

Most rushed to allocate more of their funds under management to the sector as the boom was in full swing, and soon to end.

There is a natural tendency also for private equity managers to increase the size of the fund with each consecutive raising - hence the funds raised in 2006 tended to be about double the size of the preceding raisings in, say, 2002. The latter though was the ''vintage'' to enjoy, rather than the former. Anything bought in 2006 is likely to be a failure thanks to the downturn.

It is strange that super funds themselves were, until recently, not permitted to gear their investments at a super fund level, but there were no restrictions on investing in private equity funds whose outstanding IRRs were reliant on extreme levels of gearing.

Past the peak

With so much money sloshing around the private equity space from 2006 onwards, and with asset prices inflated by the bull market, there was no way that 2006 and 2007 vintage funds could ever compete with the returns achieved by the 2002 vintage.

For example, vendors of retail businesses that would have changed hands at 4-5 times EBITDA in 2002 now wanted to be paid 8-9x EBITDA to sell. A quick look at the history of retail IPOs over the past 20 years shows that it is a rare business that can command a valuation of more than 7x EBITDA on IPO.

Private equity funds then which stumped up close to 9x EBITDA to purchase retail businesses in 2006 and 2007, and plenty of them did, were punting on being able to grow earnings fast enough to achieve an acceptable return despite there being little prospect for multiple expansion.

Moreover, they were gambling that multiples would hover at historically high levels for at least long enough for an exit to be achieved - say, three years.

Even then an IRR of more than 20 - 25% would be a hard-ask - a long way short of the stellar returns achieved by the previous generation of private equity assets. It seems reckless in retrospect, but then again the money was flowing into the funds, and the privateers get paid for that too.

Bad bets

We now know that neither of these requirements for investment success has held true. As a consequence, private equity in Australia is littered with assets that appear bent on losing money for their investors. Uncomfortable discussions between the lending banks and private equity managers over covenant breaches (ANZ and the Bank of Scotland were the two biggest lenders to private equity) are the order of the day.

There is also the prospect that most of the private equity managers in Australia are currently managing their last fund as the investors have been so badly burned that they will be loath to invest again.

The carnage in the sector has also left managers sitting on their hands, reluctant to draw down funds even if the funding has technically been committed by the fund investors as they know that investors have lost confidence in private equity. This is resulting in roll-up strategies being left in the lurch at just the time when there is value in the market again.

Which assets are in the worst shape? Anecdotally, it would seem the following rules apply: anything in retail is a dog, anything in NZ too, anything in mining services and anything exposed to the high-end consumer.

Retail - Australian Discount Retail has gone belly up for Catalyst and Champ. Gresham has Witchery and Mimco (no wonder Wesfarmers recently wrote down its stake in Gresham private equity), Ironbridge has BBQ Galore (the US arm of which is in administration) and Super A-mart. Archer Capital has Rebel Sport and Amart Allsports. Affinity has Colorado. TPG has Myer, Goldman has Kathmandu and PEP and CCMP bought Godfreys.

New Zealand - Catalyst has Metro Glasstech, Ironbridge has Envirowaste, Mediaworks and Base Backpackers.

Mining Services: There were a few exits here which suggest the PE investors got out just in time. Emeco for one. It was at least a 3x return for the privateers but its share price today is a fraction of its IPO price.

Getting it wrong

In other cases, private equity was left holding the baby.

In a game of pass the parcel between private equity firms, Catalyst bought Valley Longwall (a provider of specialist underground coal mining equipment) from Crescent Capital in 2007 - delivering Crescent 5.7x its original investment and an IRR of 300%. In the present market Catalyst is no hope of replicating that return, if anything.

High-end consumer - Riviera for Ironbridge is the standout here.

How did the private equity industry get it so wrong? Its practitioners are generally held to be as savvy as any in the finance world.

The industry incentive structures explain a lot. Most mid-cap funds pay 2% of committed capital to the management team as a management fee, together with 20% of any return achieved a benchmark annual return of 8% - a performance fee known in the industry as "carry".

For mid-cap funds of up to $500 million, the management team won't be making more than a good professional wage on the basis of the base fee alone. It is only if they earn "carry" that there are big dollars to be made. This structure encourages the manager (usually a team of about six people for a typical mid-cap fund) to "roll the dice", knowing that the payoff for success can be a carry cheque of tens of millions of dollars to divide among the team. The risk on the downside is that the manager does not get to manage another fund and members of the team find themselves looking a job. Assuming they were about during the golden era, they would hardly be queuing with a token at the local Centrelink.

Besides those privateers who didn't spend their winnings, the other beneficiaries of the boom were shareholders in listed companies which were taken over by private equity at a premium that was never justified.

Then there are the owners of private businesses that were purchased at prices that they could never otherwise have achieved - and of course, professional hangers-on such as investment bankers, lawyers and accountants. The frenzy threw up perhaps a billion in fees.

mwest@fairfax.com.au

New research from Celerant Consulting suggests that over half of UK business leaders find winning the hearts and minds of employees the most difficult aspect of delivering change within companies.

A survey of over 600 senior executives across Europe and the United States, carried out by the Economist Intelligence Unit, suggests that the majority of change programmes - structured approaches to implementing and managing change within a company - fail. 64% of UK leaders questioned said that half or fewer of the change programmes they have undertaken in the past five years have been successful.

The most significant challenges faced by UK companies in executing change programmes include winning the hearts and minds of staff (51%) and overcoming a lack of buy-in from local management (36%). UK bosses recognise that 'effective communications' (25%) and 'employee buy-in' (21%) are the most important factors in successful implementation, compared to global averages of 19% and 17% respectively.

Despite the high possibility of failure, the survey suggests that UK leaders spend more on change initiatives than their counterparts in any other country. The average expenditure by UK leaders in the last year (£5.43m) was 36% higher than the global average. This comes against a background of an estimated UK spend on consultants of £10bn in 2007, according to the Management Consultancies Association.

The survey also reveals that 57% of UK business leaders say their planned change programmes for the coming year are a direct response to the credit crunch. Accordingly, over a third (40%) of UK leaders plan to increase their spending on change initiatives over the next 12 months, while only 12% intend to spend less.

The quest for operational efficiency is driving change programmes. Almost two-thirds (64%) of UK business leaders say that improving their company's operational efficiency is the top issue on their agenda. In a further sign that the credit crunch is impacting on the corporate agenda, reducing costs (58%) is seen to be significantly more important than increasing revenues (43%).

Ian Clarkson, chief executive at Celerant, said: "A slowdown always put the question of 'how do we respond?' on the table - and frequently the answer becomes 'we need to change'. Yet, as leaders themselves admit that the majority of initiatives do not work, what should they do to ensure they successfully manage the process of change? "Our survey shows that companies fail in the execution of change initiatives because they are unable to win the hearts and minds of employees at all levels of their organisation. This happens when people do not trust their managers or understand what values the management team stands for. Too often a change programme is seen as an excuse to make people redundant. In order to successfully deliver change, leaders need to inspire people with a sense of urgency, have a clearly communicated vision and plan and continually motivate staff. As change management becomes part of day-to-day management, only those leaders who can successfully execute it will survive and flourish."

Ralph Hargrow, global chief people officer at Molson Coors Brewing Company, said: "Change for the most part is personal. You have to speak to people personally, to have them understand and embrace the promise of change. That requires a lot of work. Broadly speaking, the easier it is for individuals to understand and embrace the personal benefit of a change for themselves, the easier it is to win their hearts and minds. The more difficult it is to paint a vision, the more difficult it is to effect and embrace such change."

Consulting Times July 2008

Twenty-eight years ago, a brother and sister set up a bus service in Perth that ran two coaches to London. Those two coaches expanded into Stagecoach Group, at one time the biggest bus company in the world and a watchword for Thatcherite capitalism. The next step was international expansion, and that was where the wheels fell off.

Six years on from the company's nadir, where its shares hovered around 10p and rumours it was on the verge of going bust, it has fought back to surpass its peak at the turn of the century. One analyst yesterday called the group the "shining light" of the public transport sector after it announced a strong set of results.

Stagecoach's storming rise in the 1980s was described as "a classic rags-to-riches tale from the frontiers of capitalism" by Christian Wolmar in his book Stagecoach, published in 1998. It was masterminded by Brian Souter, a former bus conductor and accountant, who launched the company in 1980 with his sister Ann Gloag using their father's redundancy money.

Through a strong knowledge of the industry and following the wave of privatisation and subsequent fragmentation of the market after the Transport Act 1980 it build a significant presence in the market. By 1992 it had expanded into rail operations with the shortlived Stagecoach Rail. Its use of the system and aggressive tactics weren't always appreciated. Mr Wolmar said: "Through press coverage of Monopolies and Mergers Commission referrals and reports, Stagecoach became notorious, an emblem of the excesses of Thatcherism."

When the time came to list on the London Stock Exchange in April 1993, investors clamoured to get their hands on the stock, with the float coming in seven times oversubscribed. It listed at 23p per share, valuing the group at e134m, and over the next six years stormed to a peak of 284p in 1998. One sector expert said: "In the late 1990s all the public transport groups thought the UK had gone ex-growth. There had been huge consolidation, and everyone began looking abroad."

National Express, Arriva and Stagecoach all looked to North America. Stagecoach bought Coach USA, the country's biggest operator, in June 1999 for $1.2bn, creating the biggest bus operator in the world. Mike Kinski, who had taken over as Stagecoach's chief executive the previous year (Mr Souter had become chairman), said at the time of the deal: "We see this as a $40bn market potential."

The move proved disastrous, as over the next three years it had to issue four profit warnings, primarily relating to the US business, which sent its shares spiralling to 10p. This sparked speculation that it was in danger of breaching its banking covenants, which was hotly denied at the time by the financial director, Martin Griffiths, and subsequently proved inaccurate.

The transport analyst said: "Coach USA was not a good buy. It was a lower-quality business and had serious problems. They bought the wrong business, and added to that it was just coming into a recession in the US." The business was also smashed by the terrorist attacks of 2001. "In late 2000, the market thought were problems at the company, but no one realised how serious and deep-seated they were. They realised extensive surgery was needed."

Several months prior to the fourth profit warning, it launched a full-scale inquiry into its US operation and Mr Kinski's successor, Keith Cochrane, parted ways with the company. "There was the impression that he had tried everything and it justwasn't working," one source said. The company brought Mr Souter back, and the rebuilding process had the share price peaking at record levels late last year at 291.5p. One company insider said it had adopted a "back-to-basics" strategy to rebuild its business. Mr Griffiths, who remains the financial director, said yesterday: "The company made a poor acquisition in the US, it didn't meet our expectations. I was always confident we could come through it, but it was a painful process."

Under Mr Souter, Stagecoach sold down or restructured 70 per cent of the US operation, keeping only the most profitable businesses. But essentially it was refocusing on the UK. The group also sold down a business in New Zealand and its interests in Hong Kong. Then, two years ago, the Australian investment house Macquarie offered e263.6m for Stagecoach's London Bus division, which signalled the end of its interest in operating buses in the capital.

The analyst said: "They focused on core UK operations and set about working out how to stimulate growth and exit the unprofitable US businesses. The market perceptions are of a very good management team, and of course shareholders are happy because of the huge amounts returned to them."

Last year, rather than targeting another expensive foreign acquisition, Stagecoach returned e700m to shareholders (including Mr Souter and his sister, who still own about 25 per cent of the company between them). This followed a e250m return several years earlier, but the size surprised analysts and investors alike. "The share price has continued to rise as the market can see it is a cash-generative business and it is happy to return money to investors," the analyst said. Over the past five years the company has also halved its almost e1bn of debt on the balance sheet.

The group has been helped by the sector, which is not particularly cyclical; people will always need transport to travel to work, as well as the children using buses for school and pensioners who travel regularly to hospital. Mr Griffiths added: "The macro environment for public transport is good. People are more concerned about the environment and congestion on the roads is increasing. There is also a wave of inward migration from countries in Eastern Europe which are very comfortable with public transport."

Stagecoach's shares yesterday jumped over 7 per cent to 240.5p after it reported that its performance since the end of October had hit the top end of management forecasts.

Its UK rail business stood out, with like-for-like revenue growing 14 per cent in the nine months to 3 February. These numbers also did not include East Midlands Trains, the franchise it took over on 11 November. Elsewhere in its rail portfolio, its operation with Virgin rose 12.4 per cent. The group's UK bus operation rose 7.4 per cent, while passenger volumes on its buses grew 2.5 per cent.

The management believes that the outlook remains positive despite caution over the wider economy, particularly with the impact of rising fuel prices, although much of that is hedged.

Mr Griffiths said: "The numbers are good, and we are reassured by the continued rise in revenues. The strategy has been very clear in the past four years. We are focused, but also opportunistic, and looking at bolt-on acquisitions. As for another multibillion-dollar deal; we never say never, but at the moment we are comfortable."

LAST ORDERS: Australia's Industrial Relations Commission has upheld the sacking of a supermarket manager who drank two beers over lunch.

Employment lawyers are warning staff against too much celebration this Christmas after the Industrial Relations Commission upheld the sacking of a supermarket manager for having two beers at lunchtime.

The commission ruled Tony Selak had breached the conditions of his employment as the manager of a Safeway store in Melbourne by violating the "zero tolerance" policy on drinking in working hours enforced by Woolworths, which owns Safeway.

Mr Selak, 36, admitted having two glasses of beer over lunch in May, but argued that the policy should not apply to managers, who did not operate equipment or machinery. He said he was drinking only to help create a more relaxed environment in which he could convince a valuable employee, who was thinking of resigning, to stay with the company.  But Commissioner Gareth Grainger found Woolworths's decision to sack Mr Selak, who had worked for the company for 18 years, was "not harsh, unjust or unreasonable".

The law firm Fisher Cartwright Berriman said Mr Selak's case had national implications, especially given the looming Christmas season and its traditional festive lunches.  Alistair Salmon, a partner with the firm, said: "This decision makes it clear that an employee who breaches an alcohol policy and is sacked then, prima facie, does not have sufficient grounds for unfair dismissal.  "Employees need to look at their contractual obligations as they move into the party season, where alcohol consumption greatly increases, notwithstanding some of those obligations might be considered unreasonable."

The European Union's highest court struck down a German law that shielded Volkswagen from takeover, paving the way for Porsche to take majority control of Europe's biggest carmaker.  The ruling is a major boost for the European Commission in its crackdown on so-called golden shares, or strategic stakes that give governments special influence over listed companies.

"The Court confirmed that public authorities should not have special rights in private companies. Special rights have become an ever more endangered species on their way to extinction," Commission spokesman Oliver Drewes told a briefing in Brussels.

The law's demise could also end decades of cosy ties between management and labour at VW in a system called co-determination that gives workers a major say in how the company is run.

The court ruled as expected that the Volkswagen Law broke EU rules on the free flow of capital because it capped voting rights at 20 per cent and let VW's home state of Lower Saxony veto strategic decisions with just 20 per cent of the votes.

Porsche welcomed the ruling that lets the maker of 911 sports cars exercise all of its VW voting rights via its nearly 31 per cent stake in Volkswagen ordinary shares.  Porsche has said it has secured enough options to let it "significantly" raise its holding in VW but has declined to say whether this meant it could already gain majority control.  "There is no decision on how we will proceed. We will take the decision to the supervisory board and this will be a decision for the supervisory board," Porsche spokesman Frank Gaube said in Luxembourg.

The next meeting of the sports car maker's supervisory board is set for November 12, he said, adding he could not say whether the VW issue would be on the agenda.  One source familiar with the matter said it was unlikely Porsche would increase its stake before the end of this year. 

Analysts suspect it may await the outcome of Lower Saxony state elections on January 27 before making its next move.  This put an immediate dampener on shares of Volkswagen, which fell 3.3 per cent to 174.52 euros by 1224 GMT after briefly rising as much as 2.5 per cent following the court's decision.  Shares in Porsche were up 4.8 per cent.

VW said it would examine the ruling's impact on its statutes, while the powerful IG Metall engineering workers union called on the Berlin government to ensure labour representatives on VW's board could still block plant closures or transfers.  "The verdict puts the interests of capital markets above those of employees and Lower Saxony," IG Metall local chief Hartmut Meine said.

The 1960 VW law stipulated that Germany and Lower Saxony were each entitled to appoint two members to VW's supervisory board as long as they owned shares.  The German federal government is no longer a VW stockholder, but Lower Saxony is its second-biggest investor and said it intends to keep its VW stake of 20.1 per cent.

Porsche said it would be in favour of Lower Saxony's two board representatives remaining in their positions.  Both Berlin and Lower Saxony said they accepted the court's decision. The German justice ministry said it would immediately start the process of amending the legislation.  The EU executive is using the court to stop member states using strategic stakes in companies to thwart takeovers.

In June it gave Portugal a final warning to scrap special rights the country holds in two energy companies – Energias de Portugal and GALP Energia.  It also started legal action against Poland over a law giving the state special rights in 15 companies.  And it warned Romania over its share in the country's biggest oil and gas firm, Petrom, a unit of Austria's OMV.

PEOPLE on Australian Workplace Agreements earn an average of $106 ($NZ123) a week less than their counterparts on collective agreements, the biggest study of the new workplace laws has found.

The study of 8343 people, half-funded by the Federal Government, shows workers on AWAs earned an average $1069.57 a week, compared with $1175.97 by workers on collective agreements, with both groups working an average 44 hours a week.

The Australia@Work report, by the University of Sydney's Workplace Research Centre, shows why the debate over wages and working conditions has been ranked by voters as a major election issue since the March 2006 Work Choices law began to take effect.

The most recent Bureau of Statistics figures suggest workers on AWAs are earning 9 per cent more than those on collective agreements. But the bureau only measured the first eight weeks of Work Choices, up to May 2006, while this new study is based on data gathered until July this year. The study found collective bargaining has been disappearing for many years and that the trend is accelerating, helped by Work Choices and AWAs.

Common law contracts are also growing in popularity. Employees on these contacts are overwhelmingly managers and executives, and their average salary is $1584.29 a week.

The report also reveals Australians have some of the longest working hours in the world. More than a fifth work 50 hours or more a week. Miners work an average 55-hour week, and 21 per cent of all workers wished they could work fewer hours.

The Howard Government introduced AWAs in 1996 to encourage employers and staff to directly negotiate pay and conditions, but the report finds that direct bargaining is increasingly uncommon. Forty-six per cent of all people on AWAs say they had no opportunity to negotiate their contents. Of 177,000 people who moved onto AWAs this year, 56 per cent said there was no negotiation. The authors suspect employers are using "non-negotiated AWAs" to move workers from award entitlements to the cheaper minimum legal standards.

As this trend emerged early this year, the Government introduced a fairness test in May to stop employees trading away entitlements like overtime and shift penalties without fair compensation. The report is the first instalment of a five-year study in which the same people will be interviewed each year. It was jointly funded by the NSW Labor Council and the Federal Government through the Australia Research Council. The report also found high-skill employees on
non-negotiated AWAs are working more paid and unpaid hours than those on individual contracts. Staff on these take-it-or leave-it AWAs "earn the lowest hourly rate regardless of skill level," the report says.

James Chessell, a spokesman for the Minister for the Minister for Workplace Relations, Joe Hockey, challenged the conclusions of the study. "We think the ABS figures are a more reliable guide than a study cooked up by [Research Centre director] John Buchanan and his cronies," Mr Chessell said.

BRW Rich 200 members have offloaded assets valued at more than $15 billion in the past year. So why have they done it and what does it mean for the economy?

Australia's super wealthy have engaged in an unprecedented level of selling over the past 12 months, disposing of more than $15 billion worth of assets. Enormous fortunes have been made, empires have been liquidated overnight, careers have ended and new businesses have been born. The economy is awash with money and private equity firms, property developers and public companies are desperate for new assets to boost returns. BRW Rich 200 members such as James Packer, Kerry Stokes, Solomon Lew and Lang Walker have been presented with deals that were simply too good to refuse.

But there are other reasons behind the great sell-off. Some Rich 200 members are selling up to expedite the transfer of wealth to their children. Some just want to retire. Others are seizing the opportunity to enter new businesses or rebalance their investment portfolios. And in what should be a warning for the business community, the Rich 200 - who are legendary for their ability to spot trends - are also selling up because they see trouble ahead.

Queensland billionaire John Van Lieshout was one of the first Rich 200 members to sell up last year. In May 2006, Van Lieshout offloaded his Super A-Mart furniture business to the private equity group Ironbridge Capital for $500 million. Van Lieshout, a Dutch migrant who arrived in Brisbane as a teenager in the 1960s and owned his first furniture store by the age of 23, built Super A-Mart into a 21-store chain with revenue of more than $350 million. The business was his life's work, but Van Lieshout knew it was time to sell up. "I got 13 times earnings," he says. "I think only once in a lifetime someone comes along and offers you that sort of money."

Greg Will, a PricewaterhouseCoopers partner who looks after a number of moneyed clients, says it is a common refrain among the legion of wealthy sellers. "There are some prices for businesses out there that are just too good to refuse. We've never seen anything like the past 12 to 24 months."

Market observers have been regularly surprised by the magnitude of many deals involving Rich 200 members. Property commentators were stunned when the Besen family received $621 million for a half-share in its Highpoint Shopping Centre and surprised at the $270 million David Burger received for the Mid City Centre building in Sydney. Media industry insiders were amazed when James Packer got $4.5 billion for a half-share in Publishing & Broadcasting Ltd's media business and when Kerry Stokes sold a half-share in his Seven Network for about $4 billion.

The $130 million Solomon Lew received for his Witchery women's fashion chain was more than most pundits predicted. Harvey Norman executive chairman Gerry Harvey thought Archer Capital's offer for the company's stake in Rebel Sport was overly generous, so he sold up and took a $150 million profit. The founder of the RAMS Home Loans business, John Kinghorn, is selling that business. Some analysts value the company at $500 million, but offers are flooding in about the $1 billion mark.

There is an old saying in the business world: when the rich start selling, the market is about to turn down. Will says many of his clients are worried about when Australia's decade-long period of prosperity will end. "It is definitely a concern for them. Waiting for the downturn is really top of mind, because that's how they have made their investment decisions in the past."

The senior vice-president of Merrill Lynch's private wealth services division, Dara Minbashian, agrees. "If you are a seasoned investor you always get worried when there is so much money around." Van Lieshout has clearly made a judgement that the prosperous times the company has enjoyed thanks to the Queensland population boom could be about to end. "The furniture business is wonderful when there is a housing boom. But it is tough when the housing market isn't going so well."

Indeed, Van Lieshout seems genuinely confused about the state of the Australian economy. As part of the Super A-Mart sale, Van Lieshout retained the property Super A-Mart sits on, including its stores, warehouses and offices (the portfolio is believed to be worth about $400 million). He had planned to plough some of the proceeds from his sale into more property investments but he is struggling to pick the market. Prices have skyrocketed in recent months to levels Van Lieshout cannot understand. "There must be so much money in the market that people are willing to pay anything. I don't want to sit on the sidelines for too long because maybe the market will stay like this. It makes me a little bit worried. Whenever I see that it's too good for too long I get concerned. It is certainly different to what I have seen in the past 40 years."

Some property-industry moguls are also wondering whether the market is near its peak. In November 2006, Lang Walker sold a $1.1 billion chunk of his property portfolio to listed property group Mirvac. Included in the deal were shopping centres and a slew of retail, commercial and industrial property. Walker started the sale process in March 2006, but most potential suitors baulked at the price he was asking. In the end, Mirvac picked through the assets individually and Walker sold only those he felt were priced correctly. West Australian investor and Rich 200 member Stan Perron also purchased some of Walker's assets. What makes the sale particularly significant is that it is the second time

Walker has sold the bulk of his portfolio. In 2000, he sold the listed Walker Corporation to Australand for $110 million, brilliantly picking the top of the cycle. Bill Bowness sold the Australian portfolio of his Wilbow Corporation to listed property company FKP for $330 million in September 2006. The sale was partly driven by Bowness's desire to step away from what he calls the "property coalface" and diversify into areas such as mezzanine financing.
Last year, however, he said he was shocked at the prices being paid for property assets. "There is so much money around and there are fund managers who are wanting to do all sorts of things," he says. "There will be tears."

But it is not all bad news. The managing director of Goldman Sachs JBWere's private wealth management division, Paul Heath, believes there are other reasons for the great sell-off besides big prices and concerns about the business cycle.

He points to succession as a big motivator. Australia's wealthy entrepreneurs are ready to hand over to their children, but are finding the next generation unwilling to grab the reins. "The younger generation see other opportunities that don't involve the family business," Heath says. Many rich entrepreneurs are finding that selling their business and splitting the proceeds is a lot easier than trying to persuade unwilling family members to take over.

Goldman Sachs JBWere's head of investment banking, Clark Perkins, says the spate of sell-offs also has much to do with the rapid growth of the private equity industry in the past 12 to 18 months. While wealthy business people have always had the option of selling their business through a public float or a private trade sale, the extremely flexible nature of private equity deals gives them a range of new options. They can sell a business in its entirety, or just sell a chunk. They can arrange to stay in the business for five years or stop work immediately. They might, like Van Lieshout, sell the operating business and keep the property.

"Private equity is providing ... a very real alternative that just didn't exist five years ago," Perkins says. He adds that a private equity deal is also often more palatable for a wealthy entrepreneur than selling out to a bitter rival through a trade sale or facing the public scrutiny a float brings. "Private equity provides a discreet, more confidential exit compared to the public market."

Of course, not every sell-off was motivated by a desire to exit. Perkins says many wealthy business people are also looking to do private equity deals to take their business to the next phase of its life. "They are looking for some fresh thinking and a drive to push the business to grow again." That is exactly why James Packer and Kerry Stokes did private equity deals.

By selling half of their media businesses for $4.5 billion and $4 billion respectively, Packer and Stokes have built massive war chests with which to make other acquisitions and expand their businesses. Packer has already made several acquisitions in the gaming sector while Stokes appears poised to play a big part in the coming shake-up of the Australian media sector.

So will the great sell-off continue? Almost certainly. Private equity funds are swollen with cash and must find ways to spend it if they are to earn the returns their investors demand. This means Rich 200 members will continue to be courted and tempted with huge prices for their businesses.

Rich 200 members are also likely to court private equity firms. Perkins says wealthy individuals and families now understand the private equity model and are more confident it can deliver them a profitable exit or capital to grow.

The sell-off will also continue as the members of the Rich 200 age. Merrill Lynch's Minbashian says: "The next 10 years will see a lot of people selling up simply because they are getting old. These guys are getting to 70 and 80 and 90 and they don't want to run a business any more."

OFFLOADING
Rich 200 members who have sold assets in the past yearBill Bowness Sold the Australian assets of his Wilbow Corporation to FKP Property Group for $330 million in September 2006. He is pessimistic about the Australian property industry and was keen to cash out while the price he could get for his portfolio was sky-high.
David Burger The Sydney property developer sold the Mid City Centre in Sydney for $270 million in May last year.

John Gandel The shopping centre magnate cashed up last year by selling his management stake in the $4.8 billion CFS Retail Property Trust to Commonwealth Bank for about $400 million. In December 2006, Gandel also sold his portfolio of upmarket retirement villages to a consortium of Macquarie Bank and property group FKP for about $105 million.

Tony Haggarty and Chris Ellis In October 2006, Haggarty, Ellis and their fellow directors of Excel Coal agreed to sell the company for $1.8 billion to Peabody Energy, the world's largest private sector coal producer.

Gerry Harvey The veteran retailer sold Harvey Norman's $185 million stake in Rebel Sport to private equity firm Archer Capital. Harvey Norman made $150 million on the deal. John Kinghorn The jewel in John Kinghorn's investment portfolio, RAMS Home Loans, is on the sale block. There have already been a few offers about the $1 billion mark from suitors including National Australia Bank. Private equity firms are ready to pounce, but a float has not been ruled out.

Solomon Lew Veteran retailer Solomon Lew agreed to sell his stake in Coles Myer to Wesfarmers for about $1.14 billion in April this year, severing his ties with the retail giant after a 20-year relationship. In July 2006, Lew sold the Witchery women's fashion chain to private equity firm Gresham Private Equity for $130 million, about $15 million more than its original offer.

James Packer In October 2006, Publishing & Broadcasting Ltd sold 50 per cent of its media business to private equity group CVC Asia Pacific for $4.5 billion. Packer got the best of both worlds: PBL retains control of the new media company and also gets a pile of cash to pay down debt and sink into expanding gaming assets.

Ralph Sarich Ralph Sarich's property company, Cape Bouvard, sold $500 million of assets to United States conglomerate GE in January. The portfolio includes office buildings in Perth, Sydney and Melbourne. While the portfolio was not officially for sale, Sarich says he had many unsolicited approaches during the previous year. GE paid cash for the assets. Peter Scanlon When Peter Scanlon agreed to sell his stake in ports company Patrick Corporation to logistics company Toll Holdings, the takeover battle for Patrick was effectively over. Scanlon took
$405 million worth of cash and shares from the deal.

Kevin Seymour He put a $250 million portfolio of properties on the market in early 2006 and sold an office building in Brisbane in February for $28 million. He is good at picking market cycles and regularly trades properties to lock in profits.

Kerry Stokes He followed the lead of James Packer by selling a 50 per cent stake in Seven Network to private equity company Kohlberg Kravis Roberts for about $4 billion. Ken Talbot The coalmining veteran, who owns a majority stake in Macarthur Coal, sold his chain of six hotels to Cairns pub baron Tom Hedley in October 2006 for $110 million. Talbot plans to invest the proceeds of this sale in a private mining group. Talbot Group Holdings recently invested $26.4 million in Timor Sea explorer Karoon Gas Australia.

Lang Walker In November 2006, Lang Walker sold a $1.1 billion chunk of his property portfolio to listed property group Mirvac. West Australian investor and Rich 200 member Stan Perron also purchased some assets.

Besen family In March 2006, the Besen family sold a half share and the management rights to its Highpoint Shopping Centre for a mammoth $621 million.

Hannan family After an emotional sale process, the Hannan family sold the newspaper, magazine and online assets of its Federal Publishing Company to News Corporation for an undisclosed sum, believed to be about $340 million.

Knowles family The Knowles family company, Australian Retirement Communities, sold a portfolio of 17 existing retirement villages (home to nearly 4000 residents), three villages under development and six villages in the planning stages to listed property company Stockland in February for $329 million.

Smorgon family In June 2006, the Smorgon family agreed to sell its $550 million stake in steel company Smorgon Steel into the $1.6 billion takeover by rival OneSteel. Smorgon Steel chairman Graham Smorgon said the decision was an emotional one. "But it was a business judgement that needed to be made."

The business of living
What next? That is the question that has confronted many Rich 200 members who have sold their businesses in the past year.

Greg Will, a partner at PricewaterhouseCoopers who works with wealthy clients, says it can be a difficult question for prosperous people who leave their business. "Having a large bank balance is great, but what are you going to do the next day?"

John Van Lieshout, who sold his Super A-Mart furniture for $500 million last year, is representative of many Rich 200 members who say that selling their business allows them to indulge passions such as sailing and golf. "It's a good life. I should have done this years ago really," he jokes.

Will says retirement sounds easy, but it can be very hard for men and women used to the intense lifestyle associated with running a business. Many struggle to find something to fill in their spare time. In most cases, the only thing that helps is finding another company to channel their energies into. "They get some little business interest that soon takes over and the cycle starts again," Will says.

Van Lieshout has plenty to keep him busy. He has retained the properties Super A-Mart sits on, a portfolio believed to be worth about $400 million. He has a small property development firm called Unison and he has established a small office with five staff to examine other investment opportunities. "I'm doing an apprenticeship in trying to learn about money markets and shares and investments," Van Lieshout says. "It is complex and I don't have a lot of education so it takes me a while to understand, but I am enjoying the learning process. He keeps an eye on the Super A-Mart business - it is, after all, his biggest tenant - but says he does not want to interfere with the new owners, the private equity firm Ironbridge Capital.

Van Lieshout, who prided himself on running a very tight ship at Super A-Mart, has caught up with one bit of scuttlebutt that makes him chuckle. "I have heard them say that it is one of the few businesses they haven't been able to trim any costs from."

Wellington (dpa) - Filipino labour unionist Dennis Maga is conducting a speaking tour of New Zealand to condemn political repression and killings in his homeland a week before President Gloria Macapagal Arroyo arrives for an official visit, a union leader said Monday.

Maga is speaking particularly about killings during last week's Filipino elections, said Laila Harre, secretary of New Zealand's National Distribution Union.

Arroyo plans to attend the Asia-Pacific Regional Interfaith Dialogue May 29-31 at Waitangi. It aims to strengthen regional security, promote peace and tolerance between different religions, and build networks between religious communities in South-East Asia and the South Pacific.

Harre said the Philippines National Police description of last week's polls as "relatively peaceful" was an outrage.

She called the Philippines the "Colombia of the South Pacific" where hundreds of government-sanctioned killings have been ignored and said Iraq was the only country more dangerous for journalists.

"Four poll watchers were killed last week, bringing the total number of killings during this election to 126," she said. "A left-wing political party leader was also abducted, another attempted abduction failed and another poll observer also went missing just in the last week."

Harre said Maga was president of the "Free Ka Bel" movement to free Ka Bel Beltran, an ailing 74-year-old congressman and chairman of a large trade union federation, whose detention for 16 months in a hospital had been labelled unlawful by the Inter-Parliamentary Union.

Maga charged that Ka Bel was just one of many victims of increased political repression in the Philippines under Arroyo's administration.

"Besides intimidating political opponents, 858 extrajudicial killings have been documented since her rise to power," he said. "Over 130 of the deaths are from just one party representing the urban poor.

Most of the victims of the political killings have been leftist, political, human-rights and labour activists. Activists have accused the military of being behind most of the attacks, and several foreign fact-finding missions, including one conducted by a UN human-rights investigator, have concluded that the armed forces could indeed be blamed for most of the killings and about 180 forced disappearances.

Amid mounting international pressure to resolve the political attacks, the Philippine government has called on various foreign governments and organizations, such as the European Union and the United Nations, to help it investigate the killings.

"We are very concerned that your prime minister is hosting the president when our elections are being slammed by our media, independent watchdogs and international observers as rife with fraud, intimidation, killing and coercion of voters," Maga said.

He called it a "tragic irony" that the Philippines was elected to the United Nations Human Rights Council on Friday.

You might want to think twice before making another personal call during work hours.

Companies can now buy a service that automatically analyses phone calls made by office staff, figures out which are for business and which are personal, and delivers a monthly list of repeat offenders directly to top management.

"If you're making a 30 second call every morning at about 9 a.m. and the number doesn't match those used by your colleagues then we can guess fairly accurately that's your spouse," said Robert Picton, product manager at South African IT firm Dimension Data.

Picton says that although other IT companies offer call analysis technology, Didata is the first to translate that information for managers, without requiring staff to use passwords - a system he says is open to abuse.

Didata says a company can cut its phone costs by 10-15 percent by using the 'Guardian' monthly service, not to mention hours of manpower saved through increased productivity.

Employees might bristle at the thought of managers monitoring calls. But Didata says the system focuses only on those who run up huge bills or spend hours of work time on personal calls, and says no one listens in to the calls themselves.

"Obviously it is acceptable to make a few calls home," said Picton. "But this is about the minority who are spending 12 hours a month on the phone for non-business purposes and running up bills of 800 rand ($NZ155).

The low prices enjoyed by shoppers at British supermarkets are paid for by poor wages, job insecurity and a denial of basic human rights for workers in some of the world's poorest countries, a report has concluded.

The growing power of big supermarkets is the driving force behind a mode of doing business that is made possible by exploiting workers, particularly women, in developing countries, the report says.

The document, produced by the development agency ActionAid, accuses the supermarkets, who take £7 out of every £10 spent on the high street, of using their vast market power to drive down prices at their overseas suppliers.

The investigation found that supermarkets were paying wages of as little as 5p an hour in some Bangladeshi garment factories, while in India some workers processing cashew nuts were being paid just 30p a day.

ActionAid, which works in more than 40 countries, urges the Government to set up an independent regulator and calls on supermarkets to acknowledge publicly the damaging impacts of buying practices on workers and suppliers, and take concrete steps to address them. It calls for "binding legislation" to help protect workers' rights as voluntary initiatives are not working.

"Labour rights abuses in supermarket supply chains remain systematic, and in fact they are becoming more severe. It is becoming painfully obvious that a decade of voluntary attempts to curb the negative impacts of these practices has failed, and that only binding legislation will have sufficient teeth to make inroads," the charity says.

The report comes mid-way through the Competition Commission's inquiry into the £120bn grocery sector. The watchdog is keen to investigate the relationship between supermarkets and their suppliers but is struggling to persuade suppliers to speak out. It has said it has "concerns" about how the supply chain works in the UK.

ActionAid claims that shopping could become a "tool for poverty reduction" if supermarkets treat their suppliers better so that more of the millions of pounds spent every day on grocery shopping in the UK flowed back to the workers producing what Britons buy. "This is how development happens," it says.

An investigation into how bananas are grown in Costa Rica found that workers' rights, pay and conditions have suffered from the intense price war that rages between UK grocers. Suppliers are forced to absorb the costs of the banana price battle because they need the business: supermarkets typically take between 70 per cent and 90 per cent of a banana supplier's stocks.

In response, wages have dropped to as low as 33p per hour and job insecurity has increased, with women being forced out of permanent jobs into casual, piece-rate work. The charity welcomed recent moves by some UK grocers to stock more Fairtrade-certified bananas, such as Sainsbury's decision to sell only Fairtrade bananas, but said there was a danger that "corporate goodwill to respect people's rights can be reneged on when market conditions get tough".

In the Indian cashew growing industry, ActionAid found that for every pound shoppers spent on the nut in UK supermarkets just 1p went to the women workers who processed the nuts. Another 22p was shared between Indian farmers, traders, processing companies and exporters, leaving 77p for importers, roasters and supermarkets in the UK.

Sainsbury's said it was working hard to address the issues related to labour in the Costa Rican banana industry. "We have invested considerable resources into addressing them," a spokesman said, pointing out that, by July 2007, all of the farmers providing Sainsbury's with bananas would receive a Fairtrade price premium for their crops. "This ground-breaking move has led the industry, with other retailers now following suit," Sainsbury's said.

Tesco defended its relationship with suppliers, saying it worked with them and non-governmental organisations to solve any problems. "It's no secret that conditions in developing countries can be difficult. But these countries and their suppliers believe, like we do, that trade is the best route out of poverty," the group said.

'I suffer from severe pain in my toes and knees'
Bindi, a 58-year-old mother of six, from Kerala in India, works for a large processing company that exports cashew nuts to the UK market. "I have severe pain in my toes and knees and sometimes back pain. But I have to work to fend for myself and my family," she said.

Bindi's hands are covered in blisters. Asked why she does not wear protective gloves, she said: "We have to buy the gloves ourselves; the management does not provide us with gloves. Besides, I will only be able to shell five kilos if I wear gloves instead of the usual 10."

She said: "The managers use malpractices and underweigh the shelled nuts.". A survey found that 45 per cent of cashew workers experience respiratory illnesses, compared with 9 per cent of the wider population. "They will make us sit in the smoke-filled sheds where they fry the nuts and it causes suffocation," said Bindi.

Cashew workers' main concern is their earnings and, in Kerala, most women want their unions to bargain for higher wages.