How Crash Craddock’s GrainCorp bid was hatched

Cartoon: Rod Clement

After almost 10 years in the corporate wilderness — sometimes crashing on friends’ sofas, sometimes hanging around the underground bar he part-owned in Brisbane — Chris “Crash” Craddock’s big idea has never been closer to revolutionising Australian agriculture.

This week the intensely private Craddock emerged as the enigmatic financial engineer behind an audacious, financially complicated $2.4 billion equity bid — backed by former Business Council of Australia president Tony Shepherd and with a potential $3.2bn in funding from Goldman Sachs — for listed agricultural giant GrainCorp.

Long-Term Asset Management’s Chris Craddock. Picture: Hollie Adams

It has people who knew him a decade ago, in his life before the global financial crisis in Sydney’s eastern suburbs, scratching their heads. After years of toiling away on his laptop, the mysterious Craddock is now at the centre of the year’s most unlikely business story. “He’s put the entirety of his career on hold, chasing this Holy Grail,” says a long-time Craddock watcher.

And now, unbelievable to his many doubters, he might actually get it.

grainCorp stock price biz graph

The prized GrainCorp, whose corporate history dates back to 1916, when its original incarnation was created by the NSW Department of Agriculture, has long been shadowed by intrigue. For years investment bankers have crawled over the company — the biggest grain storage and network on the east coast — as it has struggled on after Joe Hockey knocked back a $3.4bn takeover bid by US agribusiness Archer Daniels Midland.

Watching all along was Craddock, long ago dubbed “Crash” after the 1950s rockabilly star Billy “Crash” Craddock. GrainCorp’s current chairman, Graham Bradley, hadn’t met Craddock until November 12, when Craddock and Shepherd first made their $2.4bn proposal for GrainCorp.

“It was a very brief meeting. Tony did most of the talking,” Bradley tells Margin Call.

While the well-connected Bradley — who helped select Shepherd as his replacement as president of the BCA in 2011 — hadn’t met Craddock, Bradley had heard his name since becoming GrainCorp chair in May 2017.

“There were rumours swirling around him for a few years. Management had mentioned Chris Craddock a few times,” Bradley said. The rumour was that he was trying to put together a proposal for GrainCorp.

For the best part of a decade, Craddock has been working on the structure that underpins the bid his purpose-built, Shepherd-chaired investment vehicle, Long-Term Asset Partners, has put to GrainCorp’s board.

That structure — reportedly built on a 25-year insurance contract that, goes the logic, would smooth out GrainCorp’s volatile earnings and turn it into an ­investment-grade company, reducing the cost of its debt — has split opinion since being partially outlined this week.

“It is difficult for many people — even some professional advisers — to get their head around the structure because it seems paradoxical. It is heavy on debt, but light on risk,” says a source close to Craddock early in the development of his scheme.

“If and when it becomes clear how it comes together, others will try to replicate it around the world,” the source adds.

Others are far from convinced.

“I just don’t believe it myself,” says one investment banker, with deep agricultural experience.

“It was just too speccy,” says someone else who heard the pitch years ago.

The big idea

Perhaps the most intriguing part of Craddock’s big idea — even more interesting than the complicated financial arrangements that underpin it — is the way it gestated.

“I think it’s evolved over his career,” says Shepherd. “I think Einstein was thinking of the theory of relativity when he was working as a postal clerk.”

For now, much of the career that nurtured Craddock’s idea remains a mystery. He declined to answer Margin Call’s questions about his work history or the various businesses he has been involved in.

“He’s intensely private. He doesn’t see it as relevant to the transaction. And I respect that,” says Shepherd.

While Craddock, 42, won’t confirm it himself, it’s believed he studied a commerce degree at Bond University on the Gold Coast. He then moved to Sydney, where he is believed to have worked for some years at Swiss Re, the reinsurance giant. That’s a noteworthy part of his tightly held CV in light of the insurance-focused GrainCorp bid.

Later came a stint working at Deutsche Bank in 2006 on the small cap equities desk.

Some of those who remember him from that time are stunned by his re-emergence as the brains behind the complicated $2.4bn takeover proposal.

“This was not the Ben Brazil of grain,” recalls one associate who played touch football with him about 12 years ago, in reference to the high-flying rain-maker who recently worked for investment bank Macquarie.

The evolution of Craddock’s investment idea is a mystery to the Sydney eastern suburbs crowd he once moved among.

Craddock’s corporate history does show an interest in agricultural entrepreneurship. From 2004 to 2007, he was a director and shareholder of Queensland meat marketing outfit Bluegum Marketing International, which ended in liquidation, thanks to an irreconcilable dispute between Crash and a fellow director and shareholder, John Robinson.

He was also the director of a company that owned an underground bar in Brisbane, Brunswick Social. While he remained a shareholder in the business, he had stood down from its board more than three years before that company had a liquidator appointed in 2014.

Since then, it seems all his focus has been on his big idea.

Dream team forms

It was 3½ years ago that Craddock made the pitch that could define his life. The one that — if Bradley and his GrainCorp board approve the $2.4bn bid — could reshape Australian agriculture.

A Macquarie banker had connected him with Shepherd, a businessman with vast experience in infrastructure and a keen interest in agriculture.

“I’m always attracted to people who come in with a game changer,” Shepherd tells Margin Call.

Craddock — who before outlining his painstakingly researched idea, made Shepherd sign non-disclosure forms, as he had done the same to investment bankers to whom he had previously pitched — appeared to be one of those people.

“My immediate reaction was — this sounds really good,” says Shepherd of that first meeting, which lasted for a couple of hours.

A year later, the Long-term Asset Partners vehicle was created. Its founding directors were Shepherd, Craddock and Andrea Staines, a company director experienced in logistics.

A fourth, former Aurizon boss Lance Hockridge, joined the board in June this year, two months after Margin Call spotted the foursome scurrying into a private room at Sydney power lunch spot Rockpool.

Around the same time, Goldman Sachs — including its local investment banking boss Christian Johnson — had come board.

The team was now assembled.

Plenty of uncertainty

Last Monday, at 8.36am, 2½ weeks after Shepherd and Craddock had made their proposal to Bradley, GrainCorp revealed the bid. The share price shot up almost 27 per cent — although, closing yesterday at $9.16, they remain well below the offer price of $10.42 a share.

That discount reveals many are still unsure about Craddock’s big idea.

Investment banker John Wylie — whose investment firm Tanarra group is a GrainCorp shareholder — has since denounced the bid for being “timed extremely opportunistically” to take advantage of the business’s drought-battered share price.

Wylie argued in a letter to Bradley that the “highly leveraged” nature of Craddock and Shepherd’s proposal raised, in the opinion of his Tanarra investment team, “the risk of future losses being socialised but profits privatised”.

Craddock’s supporters, including Shepherd, say those suggesting Craddock has set off on his unorthodox path driven by dreams of fantastic wealth completely misunderstand him.

“He’d certainly, probably, like to have a bit more. But he’s not motivated by money,” Shepherd says. “He’s motivated by showing that he can develop a long-term capital structure for the ag industry that really works. He’s motivated by the success of this concept.”

If only Bradley and his board would approve it.