Heatley

"For Rainbow, the pleasure of sealing the Woolworths Australia deal masked an ominous downside. Brierley’s had gone after the same 20 per cent stake for which Rainbow had successfully bid. Via its Australian investment arm, Industrial Equity Ltd, BIL already owned 20 per cent of Woolworths and was keen to increase its stake in the Australian supermarket chain. So soon after BIL had been forced to pay more for Rothmans than it had expected, Rainbow had again irked its bigger competitor by getting in the way of a deal that Brierley’s thought it should have clinched. Whether or not Heatley and Lane were aware of it at the time, their Woolworths purchase turned Rainbow into a Brierley’s target."

"The defamation action never proceeded. In the end, BIL’s greater strength, size and presence was too much for Rainbow and when the endgame came, it was played out swiftly. BIL’s Bruce Hancox asked Rainbow for a high-level meeting. Hancox came to Heatley’s office. The battle was harming both sides, he said. It was doing no good for Rainbow, for BIL or indeed for New Zealand’s investment scene overall. A week later, Hancox came again and the two companies agreed to a truce. Another week passed and Hancox returned, this time to tell Heatley that Brierley’s had started buying Rainbow shares and was aiming for a bigger stake."

"BIL made its first bid for Equity & Law in early September 1987 and Brierley was proved correct when the French giant Compagnie du Midi quickly overbid. BIL now stood to make a £20 million profit on its 30 per cent stake. Then, Heatley recalls, Brierley said, ‘Oh, they’ll pay more than that.’ Brierley’s upped its bid for the company it did not want, to 450p per share, valuing the company at £453 million. There was a nervous wait before Compagnie du Midi came back and overbid again at 455p per share. Brierley’s brinkmanship had made his company a £42.9 million ($NZ106 million) profit. But just five days after the binding offer was made, sharemarkets around the world crashed. Brierley’s timing had been impeccable but far too close for comfort. ‘If Brierley’s had not been overbid they would have been in massive strife right then,’ Heatley recalls. ‘The French must have felt sick, although they ended up owning the company, and Brierley’s looked like heroes while I was left just thinking, Wow, these guys are cowboys.’ It seems ironic that Heatley’s General Motors suggestion had BIL thinking that he was too great a risk-taker for its taste just at the point where Heatley was reaching the same conclusion about Brierley’s. They were destined to part and, given their history, perhaps that should have been no surprise. Very soon there was a lot more on everyone’s minds than investment possibilities, though. In mid-October 1987, stock markets around the world began to slide. For many investors, executives, workers and companies, catastrophe was coming."

"John Sheffield, who had been instrumental in starting Rainbow but who had left early to try other ventures, went bankrupt, as did many others. The effects lasted years. Only Japan took longer than New Zealand to come out of the post-crash mess. Heatley himself, still on the board of Brierley’s, was then 30 years old and had not been through a crash before. Like others, he initially failed to grasp the significance of what was happening. In fact, seeing Brierley’s shares come down to $3, he bought more. ‘I was young. I had never seen a bear market and initially all I saw in the aftermath of the crash was opportunity. I had not appreciated that Brierley’s’ investments in New Zealand Insurance and in everything else had also gone way down. I did not realise the substantial nature of the diminution in the valuations of everything. I had not learned about the collateral damage and the healing time required when you have a shock like that. Think of it like the Christchurch earthquake—such a massive shift will take years of reconstruction to get back to what it was but I did not appreciate that at the time. I had only seen markets go down and come back up again.’"

"Around the time that Sky floated, all the talk in the investment community was about the internet. Even though it was years before the advent of social media sites such as Facebook and Instagram, there were already fortunes being made by those who invested in the right companies. Trying to analyse or use instinct or simply guess which the ‘right’ ones were was the key to making money. Walker Wireless was part of the hype. To tap into these opportunities, Heatley, Todd, News Corp and Japan’s Softbank Corporation formed a company that they thought had bright prospects. They called it eVentures New Zealand and Heatley had a 20 per cent stake. Its role was not only to invest in e-commerce and internet-related companies but to create new ones. Its founders were hoping to experience the sort of success with start-up companies that the original shareholders in PayPal and Trade Me later enjoyed. They also wanted to introduce to New Zealand online products that were working overseas."

"Downey, who personally liked both men and professionally needed them to work harmoniously, tried to be a conciliator. He suggested that Smith and Heatley get together to try to agree on how to manage the boundary between director interest and CEO prerogative. ‘This requires you to back off a bit and Nate to come forward a bit,’ Downey told Heatley. Downey said he had suggested that Smith could try using ‘a humorous trigger word’ when he felt Heatley was pushing the boundaries, and perhaps Heatley could do the same when he thought Smith was not being sufficiently forthcoming. ‘I said to Nate, and now say to you, that none of these devices can work without mutual goodwill,’ Downey wrote. ‘With goodwill, any reasonable arrangement between or among people can be made to work; without it, even the most logical structure and process will fail.’"

"Gibbs’ primary contribution came in mid-1991, a year after Sky was launched. As Coopers & Lybrand had predicted, the fledgling business was taking longer to get established than initially estimated; the New Zealand economy was in deep recession and subscribers were signing on in a trickle rather than the steady flow that Heatley had confidently anticipated. The business was losing $1 million a week, which gained everyone’s attention. Heatley hadn’t lost confidence but admitted that he’d underestimated the startup costs. He remembers Gibbs calling him up at home one evening and saying, ‘Craig, you promised me that if I put a little bit of money in Sky I’d have lots of fun; I’ve now got more than a little bit of money in it, and it’s no fun at all.’ Their solution was to bring in more investors to contribute around $100 million in fresh capital. They started talking to Gibbs’ partners at Telecom, Bell Atlantic and Ameritech, sowing the idea that this could be a useful experiment for them. In the United States telecommunications companies were barred from investing in cable television, so New Zealand would provide an opportunity for them to explore potentially interesting synergies between the two industries. Soon a consortium was drawn together comprising Bell Atlantic, Ameritech and two cable companies, Time Warner and TCI, and they began negotiating an appropriate price for 50 per cent of Sky."

"‘It was an example of Alan saying, “Stuff it, everyone says go left; I’ll go right”,’ says Heatley."