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Skase
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Bond
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Murdoch
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Skase and Qintex
This page looks at failed media tycoon Christopher Skase
and his Qintex group, which controlled the Australian
Seven television network prior to Kerry Stokes.
It covers -
origins
Former Sun News-Pictorial and Australian
Financial Review journalist Christopher Skase (1948-2001),
blessed with film star good looks (which proved somewhat
transitory) and chutzpah (apparently a more lasting attribute)
entered business in 1975 through establishment of Takeovers,
Equities & Management Securities (TEAM) and subsequently
formed the Qintex group.
Qintex - like Australian and overseas competitors under
the command of Alan Bond (Bond
Corporation), John Spalvins (Adelaide Steamship), John
Elliott (Elders IXL), Allan Hawkins (Equiticorp) and Robert
Holmes a Court (Bell Group) - acted
as a corporate predator during the twenty years in which
the Australian economy was substantially restructured.
Typically they targetted public companies that were under-priced
by the market and could thus be acquired cheaply or that
contained assets which be readily sold, providing capital
for further acquisitions while increasing the predator's
market value.
The overall benefits of what in some instances was crude
asset stripping remain contentious and in retrospect it
would appear that several of the 'bold riders' were far
better at doing deals (often at unsustainable prices)
than managing conglomerates on a day by day basis.
Given Australia's small population and increasing competition
in the retail sector (by 2003 around 70% of consumer retail
spending involved the five largest chains) Qintex moved
from small scale acquisition of specialist retail assets
(eg the upmarket jeweller Hardy Bros, a stake in car dealer
Nettlefolds) into property development, broadcasting and
opportunistic sharemarket plays.
That move was similar to Bond Corporation's strategic
direction, albeit without the scale provided by Bond's
access to cash flow from the Swan and Castlemaine-Tooheys
breweries.
expansion
Qintex's property development centred on two upmarket
resorts in Queensland: the Mirage Sheraton at Port Douglas
and the Mirage Gold Coast. Qintex subsequently acquired
a resort in Hawaii, the 7,000 acre Princeville Mirage,
for US$116 million.
In 1984 Qintex acquired TVQ-0, holder of a television
licence in Brisbane (Australia's third largest city).
The station had been sold by Ansett Transport Industries
(ATI), the airline, busline, Bic licensee, financier and
property conglomerate acquired by Rupert Murdoch's
News group and freight group TNT under Peter Abeles.
Qintex then acquired HSV-7 (Melbourne) and ATN-7 (Sydney)
from the Fairfax group during the disposal of assets to
fund the disastrous privatisation of that group by Warwick
Fairfax Jr.
HSV-7, a network flagship, had been launched by the Herald
& Weekly Times (H&WT) publishing
empire in 1956. It was sold to Fairfax for $320 million
in 1986 after Murdoch took over the H&WT group for
$1.8 billion. ATN-7, the other flagship of what became
known as the Australian Television Network (ATN), had
gone live in 1957 under Fairfax control and was initially
affiliated with the Packer family's
GTV9 Melbourne.
In 1987 he bought Murdoch's 50% stake of film/video production
house Crawfords as part of the dispersal of H&WT assets.
With Sydney, Brisbane and Melbourne stations in hand Qintex
subsequently purchased 7 network stations in other locations,
eg SAS (Adelaide) and TVW-7 (Perth) in 1988. TVW had formerly
been part of the Bell group.
crisis
Qintex faced a challenge from the mid-1980s, particularly
as finance became more expensive after the 1987 Crash.
Like many of the enterprises it had absorbed the group
was becoming asset rich but its retail and broadcast operations
were not throwing off enough revenue to meet
- ongoing
property development costs
-
the weight of debt and
- dividends
to shareholders
- management
fees to Skase and other executives.
Those
fees were to prove particularly important. Like several
of his peers Skase had borrowed to maintain his equity
in the group. That borrowing was sustained by special
management fees, some of which were undisclosed and thus
breached Australian corporations law. Some sense of those
payments is provided by the revelation that fees to Qintex
Group Management Services (the entity at the top of the
corporate pyramid) in 1989 amounted to $100 million.
collapse
In that year Skase apparently sought to avert corporate
collapse by selling the three Mirage resorts to Japan's
Mitsui & Co and consumer credit provider Nippon Shinpan.
They acquired 49% of Port Douglas Mirage for $151 million,
the Gold Coast Mirage for $124 million and Hawaii Princeville
Mirage for $158 million. It has been suggested that Skase
was to benefit from a 'success fee', apparently undisclosed
and paid offshore, of $29 million.
Qintex then secured agreement to take over the MGM/UA
studio and film library. It was controlled by colourful
entrepreneur Kirk Kerkorian, who had recurrently bought,
sold and reacquired film and casino interests.
Skase apparently planned to fund the purchase by 'sweating'
the MGM assets in consumer markets - a strategy successfully
followed by Kerkorian in licensing the library for VCR
and DVD sales - and by pre-selling the rights to Japanese
investors. It was the year that Sony
bought Columbia
Pictures and Tri-Star Pictures from Coca-Cola for US$3.4
billion, undeterred by Matsushita's painful experience
with MCA and Universal (later part of Seagram
and Vivendi).
He is reported to have reached agreement to sell those
rights for $500 million, with the deal falling through
when he sought an extra $100 million at the last moment.
The extra money would presumably have been helpful, as
Kerkorian appears to have raised his price to around $1.5
billion after eliciting interest from Rupert Murdoch.
In the words of subsequent legal action by MGM, Qintex
was guilty of a "failure to consumate" the purchase
and indeed apparently failed to find the $30 million deposit.
The deal was off. Skase subsequently claimed that Kerkorian
reneged on the deal when Sony bid three times as much
for the 'comparable' Columbia Pictures.
One observer commented that Skase's business model
was
to buy a company, sell the assets and then lease them
back. It doesn't take long to burn up the assets that
way. You need a progressively bigger takeover every
two or three years to maintain the cashflow. It was
the end when Christopher missed out on MGM/UA. He was
gone and everyone in the places that counted knew it.
Qintex
melted down in 1989, unable to satisfy demands by its
bankers (exacerbated by delays in regulatory approval
to sell further shares in the resorts) and with regulators
questioning Skase. Qintex board member Ted Harris had
alerted the National Companies & Securities Commission
(predecessor of today's ASIC) over concerns
that unauthorised payments of several million dollars
had been made to Skase's personal company Kahmea.
aftermath
A year later Skase left Australia and failed to return,
pleading bad health and persecution by authorities or
the media. His personal debts were estimated at around
$172 million.
From his exile in Majorca, where he successfully resisted
extradition attempts by receivers and government agencies
(including claims of Dominican citizenship), he was presumably
able to observe the $3.15 billion failure of the State
Bank of Victoria (rescued by the Commonwealth Bank group
in 1991), a crisis attributed to imprudent lending to
Qintex and its peers by subsidiary Tricontinental. 51%
of the Mirage resorts was sold to Nippon Shinpan in 1990.
An estimated $18 million was spend by receivers in disentangling
and disposing of over 160 Qintex companies.
Skase would also have been able to watch as the receivers
bundled Qintex's broadcast interests into a discrete company
- Seven Network - in 1991. It was listed on the stock
exchange in 1993 and came under the control of Kerry Stokes
in 1995 following disagreements about its involvement
in pay television schemes promoted by Foxtel, OptusVision
and other players.
MGM was sold to Giancarlo Paretti, whose default was one
reason for the £9 billion collapse in 1993 of French
bank Credit Lyonnais. MGM was acquired by Kerkorian and
the Seven Network in 1996 (apparently a mix of opportunism
and the network's history of sourcing films from MGM),
with Seven selling its interests for US$389 million in
1998. MGM was subsequently acquired by a Sony-led consortium,
for around US$5bn, in 2004.
Skase died in 2001. Arguably his most lasting impact was
on Australian bankruptcy law. Anne Lampe’s Media
Coverage of Complex Commercial Fraud paper
features an account of the former magnate being discovered
by Australian reporters
in his hideaway in Majorca. One picture said it all
- the double storey stone villa with Olympic-sized inground
pool, surrounded by bougainvilleas and complete with
servants, was not what his creditors had imagined when
they read about him living in a 'dilapidated farmhouse
in Spain'. Those pictures of Skase basking in the sun
with his family cooling off in the pool were enough
to convince the federal government the following day
that the bankruptcy laws, at least as they apply to
the return of passports to bankrupts facing charges
and creditors, ought to be changed immediately.
studies
Writing about Skase has centred on his departure from
Australia following the Qintex collapse and his successful
resistance to demands for his extradition from an allegedly
comfortably residence in Majorca. With the exception of Catherine Hoyte's 2003 dissertation An Australian Mirage
(PDF)
there has been no major study of Qintex or its architect.
He features in Trevor Sykes' The Bold Riders: Behind
Australia's Corporate Collapses (North Sydney: Allen
& Unwin 1994), in Lawrence Van Der Plaat's Too
Good To Be True: Inside The Corrupt World Of Christopher
Skase (Sydney: Macmillan 1996) - an account by his
former son-in-law - and in Tom Prior's Christopher
Skase: Beyond the Mirage (Melbourne: Wilkinson Books
1994). A perspective is provided by the career of Jabez
Balfour, the UK entrepreneur who skipped the country in
1892 after a corporate collapse equivalent to $800 million
and chronicled in Jabez: The Rise & Fall of a
Victorian Rogue (New York: Atlantic 2004) by David
McKie. For property adventures in Queensland see Samurai
in the Surf: The Arrival of the Japanese on the Gold Coast
in the 1980s (Canberra: Pandanus Books 2005) by Joe
Hadju.
Kerkorian is a figure in The Money and the Power:
The Making of Las Vegas and its Hold on America (London:
Pimlico 2003) by Sally Denton & Roger Morris and Suburban
Xanadu: The Casino Resort on the Las Vegas Strip and Beyond
(London: Routledge 2003) by David Schwartz.
Tricontinental is discussed in Tricontinental: The
Rise & Fall of a Merchant Bank (Carlton: Melbourne
Uni Press 1995) by Hugo Armstrong & Dick Gross, with
a broader view in John Simon's 2003 Reserve Bank conference
paper Three Australian Asset-price Bubbles (PDF).
Henry
Bosch's The Workings of A Watchdog (Port Melbourne:
Heinemann 1990) and Of Manners Gentle: Enforcement
Strategies of Australian Business Regulatory Agencies
(Melbourne: Oxford Uni Press 1986) by Peter Grabosky &
John Braithwaite offers insights into contemporary regulatory
failures.
MGM
For MGM/UA and Kerkorian see the discussion
elsewhere on this site.
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