Bandag

"*These were dangerous times. David Lange and Roger Douglas, who have a huge responsibility for the colossal inflation during the mid-1980s, had given in to rapid wage inflation. At that time we were paying 25 per cent interest on bill rates, with inflation running at 18 per cent. The world was not very happy. Banks were pretty wary of lending money in those circumstances. Who the hell could pay 25 per cent interest? The way to make the Freightways privatisation risk free was to pre-sell the parts of the business that we wanted to sell but also to get ‘put options’ on bits of business we didn’t want to sell. That way the bank could put those businesses to our partners if it needed to.* *We had subsidiaries partly owned by Bandag, tyre retreading specialists, and Mayne Nickless. We went to them and said, ‘We’re going to* *buy the business; to help us fund it, we want you to agree to buy our half of the business if the banks insist, at this price.’ These were major companies and the combination of put options was sufficient for the bank to get all its dough back if the worst happened.*"

"Once Gibbs and Farmer gained control of Freightways they had no time to lose; Gibbs remembers telling someone at a cocktail party he was paying $500,000 a week in interest, and he wasn’t exaggerating. But neither man saw the exercise as a big gamble. Farmer says: ‘We knew we could sell two businesses pretty easily; meanwhile the cash flow was good and wasn’t going to stop overnight.’ Gibbs carried out the pre-arranged deal with Mayne Nickless and then sold surplus assets, such as Grower Holdings, the canning business in Hawke’s Bay, Bandag, and some pieces of real estate, for good prices.After an intensive six-month effort they’d paid off the loan and everything left — including half of the best trading businesses, couriers, Armourguard, freight forwarding — was pure profit.[22](private://read/01jrsfvkjy84rkprtbz9amfvj8/#rw-num-note-477308-556173400-22) Roger France worked closely with Gibbs those six months. He was hugely impressed that ‘at no point did this huge deal they’d taken on feel out of control; everything landed pretty much where Alan had conceived it would land’.[23](private://read/01jrsfvkjy84rkprtbz9amfvj8/#rw-num-note-477308-556173400-23) Meantime, France observed, Farmer kept the businesses running like clockwork through an incredibly unsettling time with no damage to the cash flow or the management team."