How Kerry Stokes rewrote the playbook

Why the time is right for the media and mining billionaire to step back from his Seven empire.

Kerry Stokes is retiring from the board of his media and investment company Seven Group. Photo: Marie Nirme

Kerry Stokes was at his adoptive father’s side the moment pneumonia claimed his life in Royal Perth Hospital in November 1990.

As he said his final goodbye to the man who took him in as an orphan 50 years earlier, he reached into his pocket to find the worn rosary beads Matthew Stokes had carried all his life. The adopted son still has them today.

“They are a touchstone to my past,” Stokes whispers in his trademark soft, raspy voice on the phone from the office of his family company in Kings Park Rd, West Perth, a plush mix of marble and wood and home to one of the nation’s best art collections.

It is now legend that Stokes was born John Patrick Alford on September 13, 1940, and adopted out to Matt and Irene Stokes, an impoverished Catholic couple that for a time lived at Camp Pell, the post-war slum housing area in Melbourne. They renamed their son Kerry.

“I just am grateful they did. Even though it was a strange relationship, had it not been for that, I wouldn’t be who I am today and I am grateful,’’ he now says.

Stokes struggled to control his emotions as he gave the eulogy at his adoptive father’s funeral at the Holy Rosary Church in Nedlands. Some say it was the most upset they had ever seen him. Stokes agrees it was “up there” as one of the toughest days of his life.

“Matt was a hard-working, unskilled labourer who actually never got a great deal of enjoyment out of life. He just contributed. He did whatever he had to do for us to eat at night,” he says.

“Before he died he was pretty chuffed back then at what had been achieved. He said to me he was most proud of the fact that he didn’t try and influence me – he left a blank canvas. It has got some colours on it now.”

Three weeks before celebrating his 81st birthday, Kerry Matthew Stokes this week decided one part of the canvas had been painted to perfection.

The entrepreneur, who arrived in Perth in 1960 and got his start fixing TV aerials to suburban rooftops before getting into real estate and later building a media and mining services empire, revealed he felt confident enough in the talents of his eldest son and his board to cease chairing the family’s most important public company, Seven Group Holdings. The now 45-year-old Ryan Stokes has been putting his stamp on Seven Group ever since taking over as CEO in July 2015, overseeing a refocus on its Wes­Trac mining services franchises in NSW and Western Australia and government infrastructure investment through its Coates Hire division, as well as gas development through its stake in Beach Energy.

Seven now holds a 70 per cent stake in building products giant Boral following a year-long ­campaign to wrest control, and Ryan is now installed as the Boral ­chairman on top of his ongoing role as Seven Group chief executive. He is also chair of WesTrac and Coates.

Asked if the Boral deal had been the making of his son in the public eye, Stokes replies:

“With due respect, I think Ryan has been an excellent CEO since the time he was appointed. In a number of activities. He was responsible for selling our Caterpillar business in China in 2017. The reason we got the price for it is because, under his direction, the company improved its profitability,’’ he says.

“I am proud of what Ryan has achieved. I remember seeing him off to the States when he went to Merrill Lynch (Ryan worked briefly in New York in the late 90s before joining the Stokes family’s private company, Australian Capital Equity or ACE). He didn’t want to come home from Merrills because I wasn’t going to pay him enough. So I had to pay him a bit more to get him to return.”

Given his US apprenticeship, it has been said that Ryan thinks like an investment banker. His father agrees, but with a caveat. “Yes, but with an eye to detail. He wouldn’t accept the overviews like a merchant banker would; he would still want to understand the detail himself, which is most important.”

Kerry Stokes in his office at ACE (Australian Capital Equity) in Perth. Photo: Marie Nirme

He says his son’s strategic thinking has been “demonstrated in what has been achieved” at Seven Group, also noting the turnarounds of Coates Hire and Seven’s listed subsidiary Seven West Media – the owner of the Seven TV network and West Australian Newspapers.

With Boral, Seven had a less than 20 per cent stake in the embattled building group last September but gradually increased its holding via creep provisions in the Corporations Law, before accelerating its efforts in early 2021.

It was a classic Kerry Stokes play – to stalk its prey and agitate before securing the prize for less than a full price.

It is a modus operandi that has long angered his opponents. It once forced James Packer to part with some of his most prized assets in a panic to fight off a Stokes advance on his media company.

“We have used the model before,” Stokes says with a chuckle.

“This interpretation of it was in fact Ryan with his team and his selection of (corporate adviser) Barrenjoey and (its co-founder) Matthew Grounds. Ryan and I have known Matthew for years. I had a lot of confidence in Matthew. The strategy they put together was executed exactly as it was planned, to the cent.

“I didn’t have a lot to do with the transaction. I overviewed it. The Seven directors had very strong input. The strategy they outlined was followed to the letter and it was successful.”

Asked how Ryan is like him, the father initially brushes the question off as one for his son. But pressed, he replies: “Like me he is detailed, persistent and very hard-working. I also want to make the point I have another son who I also love dearly who works in our private company. He is doing a great job there. He is very quiet because ACE is very quiet.”

Bryant Stokes was born in 1977, a year after his brother, when their father was married to his second wife Denise. They were about to turn 11 and 12 when she left the marriage in 1988. She now lives in Queensland.

Their father says the now Sydney-based sons are close.

“Even more so since they have had children, which is very rewarding for me,” he says.

Ryan has always been wary of talking publicly about his father. When asked 18 months ago if there was a secret to the success of their relationship, he said they worked well together before adding: “Never lose sight of the fact that while you might be family, he is still the boss.”

Ryan has always known his place in the empire, yet now remains the only Stokes on the board of the family’s biggest public asset.

But he was quick to note this week that there was no decrease in the Stokes family’s financial exposure to the success of Seven Group and that his father would remain involved, albeit in a different way. He claimed his father’s decision to exit the board was a sign of confidence in the calibre of the independent directors and management, and where the company and its diversified assets were positioned. Kerry Stokes concurs.

“The Seven Group was in such a good position. The board had been so strong. And Ryan and his management team had performed so well that it was the right time. I did want to see the Boral transaction concluded. It has always been my intention to make sure I left before it was too late. You never know when it is too late until it is. I had no intention of staying past when I wasn’t ­needed.”

Stokes will remain a strategic adviser to the Seven board and management for at least the next three years for an annual fee of $475,000 to maintain what he terms “continuity of knowledge”.

“My knowledge of history and the company is probably better than anybody else’s. And for them to have access to that is valuable,’’ he says.

“They are paying me a good sum so I have to earn it. If I want to I will attend a board meeting. If I want to I will give advice to the board or to management. We will see how it goes.”

As some commentators put it this week, it sounds like a Clayton’s retirement. Indeed, ask Stokes more about Boral, the $3.5bn pile of cash inside the company and the work-in-progress turnaround of its Australian business and you quickly appreciate his passion for the asset he first dealt with as a Perth property developer decades ago.

“The potential I see in their transformation is much greater than they are contemplating. It has an opportunity to gain market share, improve its efficiencies and to control and restructure its cost base,’’ he says.

Perth-based Stokes is yet to meet Boral’s chief executive, former Brambles numbers man Zlatko Todorcevski, but wants to when Covid restrictions permit.

“I am taking Ryan’s word that he finds him a good CEO,’’ he says.

What Stokes won’t miss about Seven is wading through its detailed board papers each month. His dyslexia was not diagnosed till he was in his 30s and it still troubles him, but he gets by. “We are a company where our governance will meet any standard and to achieve that means you have to have an eye not just to statutory requirements but to a broader view of all of the associated issues. That is making it much more complex for boards today. I’m concerned if we make it any more complex we will struggle to find the right directors.”

Stokes will retain his chairmanships at Seven West Media and ACE, which owns a 57 per cent share in Seven Group.

ACE has property, pastoral and industrial activities, including bankrolling Australia’s biggest new salt project in 20 years, BCI Minerals’ $913m Mardie project in northern WA. It also owns several ­assets in China, which Stokes says it plans to retain despite ongoing geopolitical tensions.

“We have always had a very good relationship with China. Our investments have been very profitable. We have had no problems with the government there,” he says. “I don’t think China will close its borders to money or walk away from foreign investment.”

His passion remains Seven West, which under the guidance of prodigal-son CEO James Warburton – who once defected to Channel 10 – now boasts its best balance sheet, cost base and growth outlook for many years.

Some analysts have termed it a “Lazarus-like recovery” from 18 months ago when there were fears it could go broke. “Most analysts were not aware of what was happening inside the company. The year before last we set our plan which addressed all the obstacles. It involved an Olympics, the schedule, a whole host of things that would have seen us to debt reduction and solid earnings. We were not prepared for Covid … it caused a series of difficult events we weren’t ready for,” Stokes says.

“We were never, ever in the dire straits that the market seemed to believe. I was surprised anyone would ever think I would let a company that I was involved with not be in a position to meet its obligations. I can say over my entire my life we have never, ever missed an obligation.”

In the past some who know him well have asserted Ryan Stokes would sell Seven’s stake in Seven West if it wasn’t for his father’s passion for the assets.

“Ryan is more hard-nosed on those issues than I am, and that is a good thing. But if you asked him today, I think he would say he is seeing the value in the transformation of Seven. Now we see a pathway we are excited about,’’ his father says.

He doesn’t disagree that his son would have felt differently 18 months ago. “Probably, but that was because he was focused on other issues. He was running a large company and Seven West was just a small part of it,’’ he says.

While Stokes agrees Warburton will be “very hard-nosed” on Seven’s future involvement with the Olympics given the $50m loss it took on the Tokyo Games, he stresses his CEO’s public vow to use new financial metrics for acquiring rights won’t diminish the network’s appetite.

“You say we lost money, but the effects on our schedule, the impact of the 7Plus digital channels, they give us a bigger future. We see huge opportunity in that,” he says.

Stokes told biographer Andrew Rule years ago that he will forever be a “restless” soul and he remains so, in so far as he remains curious and wants to be involved in business. He sees himself as “a chameleon”, which reflected his ability to switch between being a businessman, philanthropist, art collector, esteemed photographer, skier and diver, amateur historian and most importantly, a father.

“In my past life I have been a chameleon in attitude,’’ Stokes now says. “Now it is more a maturing of what my lifetime ambitions are. I am not exactly going away, with Seven West, ACE and working with the war memorial. So I still have a full range of activities.”

Fellow Perth billionaire Andrew Forrest once claimed Stokes felt a great responsibility to create a legacy, claiming it was “hardwired into his nature.” Stokes vehemently disagrees. “My name appears on nothing at all other than a chair for telethon at Curtin University. That was generously done for me,’’ he snaps.

“I have never been concerned that I get personal recognition. I am not building a legacy. I am hopefully building a foundation for other people to build on.”