Mayne Nickless

"I wasn’t interested in currying anyone’s favour or in going along and asking formulaic questions, which is what I felt the other directors tended to do; I was interested in doing a good job for Mayne Nickless and so naturally I asked executives to explain themselves and account for things. I stood up to them and formulated an alternative view. None of this they enjoyed. I remember having discussions with them early on over the pricing of our loans. Having run a merchant bank for three years and helped pioneer the bill market in New Zealand, I knew a bit about it. But I felt Pettigrew was insulting: ‘What do you know about bill rates and finance?’ he sneered. None of the others said a word; they just sat back and let Pettigrew beat up on me. Initially, I thought these guys were unpleasant, but eventually I realised they were positively out to beat me up."

"*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.*"

"Somehow Gibbs and Farmer had to orchestrate events so that maximum pressure could be applied to the board to agree to the sale of Mayne Nickless’ shares. Gibbs’ strategy was to launch into the market with a first come, first served offer of $1.70 a share for 27 per cent of Freightways, which, together with Mayne Nickless’ 24 per cent, would take them to 51 per cent ownership.[15](private://read/01jrsfvkjy84rkprtbz9amfvj8/#rw-num-note-477308-556173400-15) The price valued Freightways at $114 million.[16](private://read/01jrsfvkjy84rkprtbz9amfvj8/#rw-num-note-477308-556173400-16) The stockbrokers would line up the customers to purchase the 27 per cent the night before and so they’d have all they needed within a few minutes of the market opening in the morning. This would leave the market gasping for more. All those who had missed out would watch as the share price subsided back towards $1.38 and would begin clamouring for the opportunity to enjoy the same deal. And so it proved. Gibbs and Farmer launched on Wednesday, 27 March 1985, using Tappendens as their vehicle. They’d gained their 27 per cent by 10.15am.[17](private://read/01jrsfvkjy84rkprtbz9amfvj8/#rw-num-note-477308-556173400-17) Gibbs kept his public comments to a minimum, telling the *Dominion* only, ‘We thought it was a good idea.’ The share price settled back at $1.55 and the Freightways board had a problem on its hands. Shareholders who missed out demanded to know why the board hadn’t insisted their two fellow directors took 27 per cent of everyone’s shares rather than first come, first served. Valentine could only reply that he hadn’t known anything about it; but now his and his colleagues’ prestige as top company directors was on the line."

"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."

"*We knew that if we went to Mayne Nickless and told them that we wanted to buy their half, they’d try to screw a good price. So we said, ‘Look the joint venture’s not really working. We’re not sure if we’re buyers or sellers; we’re probably sellers, but let’s first sort out the price.’ We suggested they nominate a price at which they would be prepared to buy or sell and we would have the right to decide whether to buy or sell. Because they were scared we might decide to sell them our half share of a company that they didn’t really want, their figure was pretty modest for a group that comprised 15 excellent businesses. Trevor and I looked at each other, grinned and immediately agreed to buy them out at that price.*[35](private://read/01jrsfvkjy84rkprtbz9amfvj8/#rw-num-note-477309-807254973-35)"