North West Mining

"The Perth Stock Exchange raked over the various entities behind North West Mining’s offer. Stokes and Bendat were linked to a 47 per cent slice of CPI shares through two other family companies, the Stokes family’s Vetlabs Pty Ltd and the Bendats’ Paulla Investments Pty Ltd (named after Bendat’s fortunate adult children Paul and Laura). As with Retford and Villaro, the issued capital of these two family companies was held in trust by Stokes and Bendat’s tax advisers, their solicitor Geoffrey Cohen and an accountant called Harrington. The stock exchange was uneasy about the ‘Russian doll’ layers of ownership and control of the various companies involved in the takeover, and whether minor shareholders had a clear understanding of what was happening. The exchange chairman noted in a public statement that Stokes and Bendat would obviously have influence over the trustees but concluded that the two businessmen did not technically control the trusts themselves. ‘Shareholders would no doubt be able to view the acceptance of the offer . . . in this light,’ the statement concluded. Turning to the valuation of the shares at $1, the exchange conceded the transaction did not need compulsory valuation by a qualified valuer or at least two directors — but stated it was disappointing that the CPI board had not sought an independent opinion of the offer. ‘Despite the controversy,’ Bill Rayner would note later, ‘shareholders voted with their hip pockets.’ On 29 June 1977, the company announced a 98.6 per cent acceptance of the North West Mining offer. Game, set and match to Stokes and Bendat."

"THE BARE BONES of the coup were later exposed in the takeover documents required to be lodged with the Perth Stock Exchange. The two family companies that Stokes and Bendat controlled, Retford and Villaro, had borrowed $2.8 million from Hill Samuel and lent it to North West Mining. In return, North West Mining agreed to transfer 1,430,309 CPI shares each to Retford and Villaro. According to the lodged documents, the market value of properties owned by CPI on 28 February 1977 was about $21.5 million. The statement said this was more than $4.5 million above the value recorded on the company’s books. The new valuation boosted CPI’s net assets from $1.49 per share the previous 30 June, eight months earlier, to about $3 per share. At a glance, the North West Mining offer of $1 a share had seemed generous because it was more than the most recent market price of 70 cents. But it was well below the asset backing of $3 a share — which was why the Hong Kong bankers had resisted selling their holding at $1. But for unsophisticated shareholders, rattled by three years of bad news, it was a chance to get out at what seemed like a profit. After all, the company’s recent track record had been patchy: with sales from as low as 20 cents and up to 63 cents on the eve of the offer. For reasons carefully explained at annual general meetings, it had not paid a dividend for three years. Failed and struggling shopping centre developments in the middle of a recession had shaken shareholders’ confidence and here was a way out."

"The only test that matters, on the ground or in the boardroom, is getting past the umpires, which the North West Mining buy-out did. Stokes would not always be so…"