AustralianSuper emerges as investor turned predator

Illustration: Rod Clement

It’s tough being a minority investor in Healthscope now the Heather Ridout-chaired, Ian Silk-led industry fund behemoth AustralianSuper has gone steady with Ben Gray’s private equity outfit BGH Capital.

AustralianSuper, the biggest industry fund in the land, with more than about $120 billion in funds under management (including 14 per cent, or about $600 million, of Healthscope), has transformed from investor to predator.

The industry fund has joined Gray’s career-determining $4.1bn bid to take over the private healthcare operator.

That’s a first for this market. The scenario is further complicated by giant Canadian asset manager Brookfield’s rival $4.35bn bid for the Paula Dwyer-chaired Healthscope, which was floated out of Gray’s private equity hands less than four years ago.

As part of the BGH consortium, Ridout, Silk and Silk’s lucky moustache have backed Gray’s management skills over those of Dwyer and Healthscope boss Gordon Ballantyne to deliver superior returns from the enterprise.

Ian Silk and his lucky moustache. Picture: Stuart McEvoy

Being part of Gray’s bid team also removes the need for AusSuper to sell into a takeover and then buy back into Healthscope later when it’s eventually refloated to keep AusSuper’s index weighting in the stock.

All understandable from AusSuper’s point of view, which manages the retirement savings of about 2 million workers (and half of Margin Call).

Board members representing those workers include former ACTU secretary Dave Oliver and four more directors ­recommended by what is now Sally McManus’s law-spurning ACTU: Julia Angrisano, Paul Bastian, Brian Daley and Daniel Walton.

In the more than 25 years of compulsory superannuation in Australia, there has never been a more extraordinary spectacle than these unionistas’ slow dancing with the sharpest edge in Australian capitalism: Gray and his Ormond College-­educated private equity mafia.

But what about the other shareholders of Healthscope who could be blocked from Brookfield’s $2.50-a-share offer if AusSuper’s exclusive relationship with BGH locks the Healthscope board into Gray’s lesser $2.36-a-share deal?

For Healthscope’s 8 per cent shareholder Ellerston Capital, chaired by former Packer family lieutenant Ashok Jacob (very much not a unionista), that would reduce his return on the takeover by $20m.

That anguish has been spared for former 6 per cent shareholder Hyperion Asset Management, the Brissie-based boutique fund manager (chaired by Debbie Beale, the ex-wife of former AusSuper director now Opposition Leader Bill Shorten), which quietly left the register last year.

Margin Call understands the investor was unimpressed with Healthscope’s Ballantyne-led management.

As far as we can see, the cleanest fix for all would be for Gray to add $245m to his bid to match Brookfield’s offer so all shareholders are on a level playing field.

But then, Gray’s never really been too worried about other shareholders losing money.

Nifty shades of Gray

Ben “G” Gray has been described as “unembarrassable” for his $4.1bn attempt to wrest Healthscope off the ASX less than four years after he put it there.

Last time around, the Melbourne-based Gray was the Australian head of American private equity giant TPG. Gray’s partner now at his new shop BHG is former Macquarie banker Robin “B” Bishop and their third wheel is Simon “H” Harle, who worked with Gray at TPG. Bishop’s Macquarie was joint lead manager on the 2014 float alongside UBS, which this time is clipping the ticket for Gray’s target Healthscope.

The private hospital operator is still chaired by Paula Dwyer, whom genius Gray installed in the $475,000-a-year job last time around.

Dwyer’s UBS defence team is led by Kelvin Barry, her go-to investment banker who led the successful $11bn gaming mega-merger last year of Tabcorp, which Dwyer also chairs, with Tatts Group.

Barry’s not the only gambler-turned-doctor. His Tatts rival in the Tabcorp tussle was Joe Fayyad, then at Goldman Sachs. Fayyad is now leading Bank of America Merrill Lynch’s Australian upstart investment banking squad, in which role he is advising Brookfield on its rival $4bn-plus offer for Healthscope.

Merrills, by the way, like UBS, was also a joint lead manager four years ago on the Healthscope float.

And of course, the lawyer drones are back doing whatever it is they do.

Mark Rigotti’s Herbert Smith Freehills is managing paperwork for Dwyer’s Healthscope. In 2014, Herbert Smith Freehills advised Gray’s TPG and its private equity partner Carlyle.

That time around, the private equiteers were pushing Healthscope on to the hapless mums and dads.

No fat fees for them.

Not her Domain

Less than two months after she returned from stress leave, human resources manager Beryl Truong has left Nick Falloon’s party-loving property business Domain.

After just seven months, Truong — one of only three women on Domain’s 11-member executive team — is off to “focus on other opportunities” away from the Fairfax-backed boys club.

A former Apple employee, Truong had a wild ride since joining the $2bn Domain’s executive team in October, a month before it was floated on the ASX.

In December, complaints were made on anonymous online recruitment website Glassdoor after Domain’s infamous white-themed Christmas party. It was Truong who passed the unhappy dossier to then chairman Falloon.

That triggered Falloon’s urgent meeting in January with Domain’s then CEO Antony “The Cat” Catalano. By January 22, The Cat was gone. Shareholders were stunned.

Come February and Fairfax’s Australian Financial Review reported unattributed allegations of a sex and drugs culture at Fairfax’s property division. Despite threats, Catalano and his defamation lawyer Mark O’Brien still haven’t sued the Fairfax masthead. A correction still hasn’t run.

Falloon responded to the racy reports with an “independent always” cultural review conducted by Justine Turnbull, a former Fairfax lawyer.

When Turnbull briefed Falloon’s Domain board on her findings a few weeks ago, she told them that — aside from “a few very specific matters” — the Fairfax-backed outfit had “a strong underlying culture”.

That was a fabulously different account to that in The Fin, which presented Domain as a cross between Don Draper’s Mad Men and a filthy Motley Crue tour (when Nikki Sixx was behaving badly, even by his appalling standards).

Margin Call understands the months-long, Turnbull-led process split Domain’s executive team into rival camps.

It was a difficult workplace for Truong to manage. Even her Bondi Beach hand-holding exercises — famous among the Domain executive team — couldn’t calm Falloon’s warring factions.

Taking over the human resourcing nightmare is Fairfax’s Rosalind Tregurtha, the latest Fairfax/Domain double act. The recolonisation continues.

Other slashies include Domain/Fairfax spokesman Brad Hatch, Domain/Fairfax Svengali Sue Cato and, top of the pile, Falloon, Domain’s executive chairman/Fairfax’s chairman.

Falloon last week revealed he is charging Domain shareholders $4300 a day for his executive services at the property outfit as the search for a new CEO continues.

Meanwhile, Fairfax shareholders are also paying the former Packer man $400,000 a year to chair what remains of the media company.

Little wonder Falloon recently told Domain shareholders the CEO search could take a while.

On that remuneration package, why hurry?