Outrage over biscuit-maker help but little scrutiny for government’s own private equity play
Much outrage this week over the federal government’s $45m loan to private equity-backed Arnott’s – and we imagine quills will be getting sharpened in the Senate for the next set of estimates hearings when our pollies return from taking their families to very important business at their holiday homes.
But what about when the government is actually playing at private equity? Bailouts are the norm these days, but actual buyouts?
As was the case of CEA Technologies, whereby the government got off with only a cursory examination in Senate Estimates despite effectively nationalising a successful Australian technology business.
Sure, the hearings were late on Tuesday night, held in front of a handful of weary senators and watched by only the most tragic followers of estimates theatre.
But, given the fact that the government has dropped a lazy $365m on buying a majority stake in the business, CEA’s appearance was given a distinct lack of fanfare and scrutiny – a shame, given the obvious enthusiasm of CEA chair and interim chief executive Joycelyn Morton to be there.
For those not in the know, CEA makes hi-tech radar equipment, mostly for the Australian Defence Force – although it also has offshore contracts, so good is its kit. All very worthy stuff, and maybe the kind of technology you don’t want sold to an offshore buyer.
The company was founded in 1983 by retired navy personnel Ian Croser and David Gaul, who built the business from scratch and struck gold two years ago when the government announced it would buy a controlling share. Now, some $365m later, CEA is officially a government business enterprise – the taxpayer owns 72 per cent and Croser the rest.
Croser didn’t show for the estimates hearing, but sent a representative. Presumably he was off enjoying the product of his hard work instead.
As it happens, NSW Liberal Senator Dave Sharma was the only member of the Upper House to bother putting any questions to Morton and the private equity minister, Katy Gallagher. We can’t help but feel that Sharma was a bit let down by his free-market colleagues in the party – although they’re getting pretty thin on the ground these days, with one thing and another.
So why, exactly, did the commonwealth buy the company, he inquired?
“I think Mr Croser wanted the company in good hands. Obviously, he’d been there since its beginning and was considering the next steps for himself as part of that”, Gallagher replied, along with some guff about rigorous processes having been followed and the acquisition being in the national interest.
It’s the first part of the answer that piqued Margin Call’s interest, given the government’s well known hostility to self-funded retirees.
Was there a prospect, Sharma asked, of the government nationalising any other homegrown defence companies? DroneShield, perchance?
Similarly, nationalising Austal could save Treasurer Jim Chalmers’ blushes when it comes to making a decision on South Korea’s interest in the shipmaker, in Margin Call’s mind.
Sadly not, for anyone else in the industry looking for an exit. However, we suspect that even a government enterprise board stacked with Labor mates would have given Oleg Vornik’s share sales slightly more scrutiny than the current mob at DroneShield.
From there the questions devolved into the political issue of the week – was the company told about Defence Minister Richard Marles’ sweeping changes to military procurement ahead of the announcement? They weren’t.
No questions from other senators about CEA’s financial results since becoming a government company. For example a net-profit of $36.2m last financial year, as it happens – up 150 per from the previous year, when the government was only a minority shareholder.
An improvement, we suspect, that will come as a very great shock to Margin Call’s more cynical readers. Give it time, folks, give it time.
No probing questions about why the government is getting into the private equity business, rather than simply sticking to its existing formula of using taxpayer cash to prop up ailing industrial facilities built by private enterprise in the 1960s.
And no questions about why Marles didn’t mention the government’s majority stake in CEA when announcing he had handed the company a $275m contract for radar systems for the army in February, only two weeks after his government became its controlling shareholder.
It’s probably that Chalmers simply didn’t bother to tell him, to be fair. Or Marles slept through the bit of the Cabinet meeting when it was being discussed.
Seems to be a bit of a missed opportunity, though.
But now we know there’s at least one set of self-funded retirees who have had a helping hand from a Labor government.
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CEOs’ work-from-home meltdown is the ultimate tanty in stupidity
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