Linfox boss Peter Fox weighs in on Armaguard uncertainty

Peter Fox has called on the government to ensure cash is accepted in businesses and banks, after the failure of negotiations between Armaguard and the Australian Banking Association.

Linfox executive chairman Peter Fox.

The big banks have misused their market power to push cash distribution companies to unprofitability, claims Linfox executive chairman Peter Fox, who has called for government intervention to preserve access to notes and coins in Australia.

Speaking in the wake of a breakdown in negotiations between the banking sector and Armaguard, Australia’s biggest cash distribution company, Mr Fox has weighed into the debate.

This comes after months of negotiations between Armaguard, which distributes 90 per cent of cash in the country, and a team headed by the Australian Banking Association.

Mr Fox said the ABA’s ultimatum last week to Armaguard that it accept a $26m rescue deal was an unhelpful intervention, revealing the Linfox group was not keen to be dictated to.

“I’m hopeful common sense will prevail, but we’re happy to sit down and try and resolve it,” he said.

“I think the government has an obligation to tell the Australian community what is the place for cash in our society.”

The Linfox boss, who chairs the sprawling trucking and logistics empire founded by his father Lindsay Fox, said the deal proposed by the banks was unworkable as it would have forced Armaguard to disclose details of all its current contracts with customers.

He said this was unacceptable as it was clear the banking sector was keen to shift away from cash and towards card use, as the banks profited from electronic payments but were forced to bear the cost of cash use.

As revealed in The Australian’s Margin Call, the banks have engaged consulting firm McKinsey to determine if they can operate the cash in transit business themselves and cut out Armaguard.

Armaguard delivers up to 90 per cent of all cash in Australia. Picture: NCA NewsWire / Nikki Short

Mr Fox said the government had to ensure cash remained an acceptable means of payment in businesses, noting many Australians were facing increasing card payment costs from surcharging.

Mr Fox’s intervention comes as the ABA and a consortium of supermarkets, retailers and AusPost secured permission from the competition regulator to set up a working group to game plan a potential failure of Armaguard.

This comes after Linfox injected a further $10m in funding into Armaguard after refusing to sign the ABA’s deal.

Mr Fox said Armaguard was hoping it would renegotiate a number of new cash supply deals with the banks in the coming weeks, noting the big banks had already used their dominant market position to drive $110m in revenue out of the Armaguard business in recent years through aggressive pricing of cash supply deals.

“They’ve driven pricing below cost and below margin,” he said.

“We need to reprice what we’re doing for the benefit of the four major banks to ensure cash in circulation.”

Mr Fox pointed to a number of cash supply deals that saw the banks demand no inflation-adjusted cost price increases.

Mr Fox said Armaguard needed circa $50m extra in funding to cover the cost of the services it supplied to the banks as well as bankroll its costs from its acquisition of cash distribution rival Prosegur.

“All we really want is reasonable pricing for the services we provide,” he said.

Mr Fox said the public statements made by the ABA and the panic from some cash users, including Coles which issued warnings, has done “an enormous amount of damage”.

“I’m not going to hypothesise what happens over the 10 weeks. I’m hopeful there’s sufficient goodwill between our major banks and our customers to get it resolved,” he said.

Originally published as Linfox boss Peter Fox weighs in on Armaguard uncertainty