Brierley continues to expand

Press, 15 May 1985, Page 38

Brierley continues to expand

By

PHILLIP MELCHIOR

NZPA-Reuter Wellington

Brierley Investments, Ltd, continues to show good growth prospects. It seems likely to continue bolstering the volume and liquidity of the share market which it has dominated since 1982, sharemarket analysts said.

BIL, launched in 1961, became New Zealand’s biggest company, based on market capitalisation, late last year and is now valued at more than $1 billion. BlL’s chief executive, Mr Bruce Hancox, said the company still has a lot of plans. While he and market analysts agree that the main future growth areas are through the Hong Kong unit, Industrial Equity (Pacific), Ltd, and, to a lesser extent, the Australian unit, Industrial Equity, Ltd, BIL continues to expand inside New Zealand.

Last month, it made bids worth a total of $127 million for full ownership of EMCO Group, Ltd, and for 15 per cent of Waitaki-NZ Refrigerating, Ltd. Last week.it cancelled the balance of he

EMCO bid after acquiring 40 per cent. Analysts said it is unclear how long BIL will continue such expansion, but Mr Hancox said, “There is no cutoff point domestically.” Although analysts say there must be a political limit to how big BIL will be allowed to grow, Government officials said they will remain relaxed about it while the Commerce Commission continues to approve Brierley bids. “It’s part of the (Government’s economic) restructuring process,” one official said.

Industry sources say BIL has had a lasting impact on New Zealand’s corporate scene.

Sharemarket analysts said it is difficult to isolate BlL’s influence from that of the Government restructuring on recent stockmarket activity, which has seen the Barclays index set a series of records.

However, the New Zealand Stock Exchange chairman, Mr Reg Pearson, says take-over activity by BIL and other companies using

its techniques has been the only significant factor in market growth since 1982 when, analysts said, BIL began to dominate the market.

Mr Pearson said in an interview that the leap in total trading volume to 692 million shares in the 1983 calendar year, from 241 million in 1982, is largely attributable to BlL’s technique of acquiring com- =' s for cash rather than g shares in a takeover.

He said cash acquisitions by BIL and such firms as Chase Corporation, Ltd, Charter Corporation, Ltd, Jedi Corporation, Ltd, and Equiticorp Holdings, Ltd, have liquefied the market to a degree where it has absorbed the listing of more than 50 new companies in the past two years after a previous history of declining listings. Shareholders have received cash, which they have returned to the market to a substantial degree, Mr Pearson said.

The rise in trading turnover sloped last year, with

790 million shares exchanged, but Mr Pearson said the volume for the first quarter of 1985 surged. While figures for the quarter are not yet available, a Stock Exchange letter says the major factor in continuing high levels of activity has been take-over activity, with BIL the major catalyst. The exchange and Mr Pearson say this activity will continue, adding it has meant the market is more highly valued than is justified by fundamentals. Analysts agree BIL and its chairman, Mr Ron Brierley, have done much to change traditional management practices. They said BIL brought about more intensive analysis of company performance, making managers more acountable and increasing company generosity to stockholders. Mr Brierley made life uncomfortable for managers who wanted to continue operating in the dark and telling shareholders twice a year how much money had been made, one analyst

Mr Pearson said: “This has placed everybody under pressure to perform. Of itself, that’s a good thing, but I have certain reservations... in that it has circumscribed the ability of other than very large companies to commit themselves to substantial longterm investments.”

In 1961, BlL’s initial share float closed without reaching the 174,000 five-shilling share target Now, analysts say, BIL raisess 60 to 70 million dollars annually from the share market and fills the rest of its requirements from a variety of sources in and outside New Zealand.

It was New Zealand’s top performing company in the 15 years from April, 1970, showing growth in gross returns of 77 per cent a year.

Over the past decade, its growth was an annual 52 per cent—still New Zealand’s best rate—and in the five years since 1980 it has had an annual 72 per cent growth, third among all companies.