Rainbow Corporation

"Rainbow Corporation’s prospectus proposed the issue of 12.5 million shares. Of those, five million would be sold at 50c per share to the public, and the rest would be sold for 20c per share to the founders. Hawkins would be chairman and the five board members would be Heatley, who would also be managing director, John Sheffield, Peter Coote, Margaret George and Margaret Tapper. John Sorensen and Ken Wikeley would be principal shareholders. The prospectus records that the company had agreed to issue 625,000 options ‘to a company indirectly owned by the Managing Director Mr Craig Heatley’. The options were exercisable at 50c each at any time prior to July 1989."

"⁠By late 1983, the decision to take the company public was made. Rainbow Corporation was formed to buy the capital of Manawa Holdings Ltd, which in turn owned the separate companies running the Tamaki Drive site, Rainbow’s End and the Wet ‘n’ Wild water slides. But even with all three operations, Rainbow Corporation was tiny by the standard of publicly listed companies and it had been in operation only a short time. Studying Rainbow’s past performance could be done over a cup of tea. Nevertheless, the sharemarket was starting to move. There were 27 initial public offerings (IPOs) in 1983 and many of the new companies were doing well. Rainbow would be one of 31 local IPOs in 1984 and it would succeed beyond its founders’ most optimistic hopes.⁠"

"Sometimes, the corporations created their own opportunities. Omnicorp was symbolic of the time. It was New Zealand’s largest public float when it listed in 1985, with its three major shareholders being Equiticorp and Chase Corporation, each with a 20 per cent stake, and Rainbow Corporation with 15 per cent. The remaining 45 per cent sold to the public. Its directors were Heatley, Allan Hawkins, Peter Francis and Colin Reynolds. The names of the directors and the shareholding by their respective companies were all that Omnicorp had to its name besides its issued capital of $50 million. It had no other assets and no stated raison d’être except to allow its three major shareholders to make investments they could not make individually. Although it was not said publicly at the time, the main shareholders were interested in acquiring Fletcher Challenge if they could. It never happened. But whatever its intentions, or lack of them, investors flocked and its 50c shares went straight to $1.50 on listing."

"The takeover went ahead in August 1987. *Personal Investor* magazine reported that Heatley’s 32 million Rainbow shares, which had been about 25 per cent of Rainbow, became 20 million BIL shares, making him the second largest individual shareholder in BIL with 2 per cent. The largest individual shareholder was Ron Brierley himself, with 4 per cent of the company. Margaret George and Margaret Tapper did not do well out of the settlement, which gave three BIL shares for every five Rainbow shares, and four BIL shares for every five Rainbow options. ‘In the conversion to Brierley shares, something went on with the Rainbow options which diminished the value, or it should have been spread around us all,’ Tapper says. George agrees. ‘I think that’s where I ended up a bit confused and wondering what had happened.’ Everyone involved in the company had learned so much, but there was nothing they could do to save it at the end. On 23 November 1987, Rainbow Corporation was delisted from the New Zealand Stock Exchange. The Rainbow that had arced so brightly had quickly faded away."

"Heatley was reluctant. His instinct was not to agree, but by then Rainbow had its back to the wall. Brierley’s had more mana, its executives had more longevity and credibility with the public and its campaign against the merger with Progressive had damaged Rainbow’s image and substantially diminished its market value. Rainbow had been overstretched and Heatley had been out-manoeuvred. ‘There is no question they intimidated us,’ Heatley says, although he told *Personal Investor* magazine afterwards, ‘I must add that if the situation was reversed, then I probably would have done the same thing.’[9](private://read/01jectdbce729daxqkxt7cbe8r/#mn14) Additionally, despite being willing to defend his ground, Heatley’s preference was the personal and cordial approach. He had never liked the public fight and knew that Rainbow could not win it. In fact, the battle of public opinion had already been fought and the outcome was that Rainbow shares were now trading for just over $2, about half their value since the battle for Progressive started. In April 1987, the wrangling was brought to an end with the announcement that BIL would buy 30 per cent of Rainbow Corporation from its directors. That would take BIL’s stake in Rainbow to 32 per cent and allow BIL to effectively control Woolworths."

"His eldest and youngest children, Ben and Josh, share Heatley’s interest in finance and investment. However, there is potential difficulty for children following the same career path as a successful parent. Perhaps, being the eldest, the risk of living in his father’s shadow weighs most on Ben. For as long as he can remember, Ben has been interested in the commercial world but is conscious that at 27 his father was already floating Rainbow Corporation. ‘It sometimes makes me feel as though I’ve achieved very little by comparison,’ says Ben, who is gradually becoming more involved in managing some of the family’s investments. ‘Dad comes across very confidently in a business environment. He has everything under control and is impressive to watch. But from my observations, success in the business world can sometimes be a result of a deep insecurity or a sense of not being good enough. Business becomes the channel through which some people choose to prove their worth. So, on the face of it, yes, he is confident and we kids are too, but we’ve still got our fair share of insecurities.’"