On the Road for Privatisation: Selling the TAB to the Finance Houses of the World

It is common for major companies to undertake ‘road shows’ when they are endeavouring to convince the big financial investment houses to buy in or stay with the shares in their company. The senior people of the major company travel around the world giving information presentations and answering questions at pre-arranged gatherings of those who look after the investments for their clients.

The two firms handling the TAB sale on behalf of the NSW Government, ABN AMRO and Merrill Lynch, strongly recommended that a road show be arranged for the 1998 privatisation. The TAB Chairman, Gary Pemberton, challenged the need for the effort given that it was obvious the sale was attracting intense positive interest. Gary had great experience in the field and was able to point to the outcomes of the Qantas sale that he had earlier overseen for the Commonwealth Government. Nonetheless the NSW Government decided to listen to its appointed advisors and a road show was scheduled. One concession though was that the size of the touring party and the duration of the tour would be kept to a minimum.

Accordingly it was determined that the party would be Gary Pemberton, myself as the TAB Managing Director, Sky Channel Managing Director, Warren Wilson, and the Project Manager TAB Sale Taskforce, Joe Collins. Joe Collins, who later became a TAB employee for a short period, was then on secondment to the Treasury from Sydney Water. ABN AMRO and Merrill Lynch advised that they would nominate staff to accompany the party. The road show would first be staged in Sydney then Melbourne before heading in turn to Hong Kong, London, Edinburgh, New York and Boston.

Under the prevailing Government travel guidelines the party was booked to fly business class. Gary Pemberton pointed out that this would cause a problem as he was also Chairman of Qantas and they would automatically upgrade him to first class. This would cause difficulties with necessary discussions as the road show proceeded. Having regard to the considerable savings achieved through the smaller than planned party size and tour duration the Government decided all would be booked first class.

The Sydney shows were held over two days: 18 May 1998, and 22 May. The format used for these events was virtually the same for all the shows: a one hour duration made up of 15 minutes each from Gary Pemberton, myself, and Warren Wilson then general questions. We three presenters used slides in a PowerPoint type display. The Merrill Lynch representative copied these slides as enlargements onto cardboard sheets, as ‘story boards’, to be used where the room did not have video facilities. One show was scheduled on 18 May, 5pm to 6pm. There were three shows set on 22 May, 9am to 12noon. The Melbourne effort was a one-day trip 25 May. Seven shows were packed in as all the venues were in Collins Street.

Monday 1 June saw the party en-route to Hong Kong. Once we landed it was very obvious the Qantas ground staff knew their Chairman was on the flight. Asian gentlemen wearing Qantas suit jackets were everywhere wanting to carry bags and open doors. One pursued me into the car so he could put some promotional wristwatches with the Qantas logo into my pocket. The late night arrival at the Mandarin Hotel necessitated grabbing some immediate sleep as the first show was set for 9am the next morning. Once again seven shows were packed in with the midday event also a videoconference for a gathering in Singapore. After a quick business dinner it was off to the airport for the flight to London. Only three shows were set down on 3 June, all in the afternoon.

The next day it was back to the seven in a day grind. Friday 5 June saw us on an early flight to Edinburgh. There were four shows with the early afternoon appointment for a single investment manager who was regarded by ABM AMRO as being of particular interest. The venue for the latter was a converted attic in the Balmoral Hotel on Princes Street. There were no lifts and the stairs were steep and narrow. When we arrived the room was set up but there was no sign of the investor. Our mood was not positive as we sat around discussing what we should do. After 15 minutes the door burst open with a very out-of-breath man appearing. He informed us the investment manager’s wife had gone into labour with her first child and as a consequence he had to substitute for the manager at the presentation. The presentation was a disaster as the substitute acknowledged he knew nothing of the subject, had never seen a horse race, or placed a bet.

On the flight back to London I looked through the airline magazine from the seat pocket. It had an article on the English Derby scheduled to run the next day. I noted that lightly raced colts had performed very well in the event over recent years. Saturday was the only scheduled rest day for the tour but Gary Pemberton decided that we should have a brainstorming session on the merits of reducing the take-out from totalisator pools. I was a bit miffed, as I had planned to find a betting shop and watch the Derby there. As it turned out Gary felt we had exhausted the session subject by 1.30pm and he decided he would come to the betting shop with me. It was a surprisingly quiet William Hill shop. The Derby favourite at 11/4 was Cape Verdi, a very good filly and ridden by Frankie Dettori. I went for the lightly raced colt named High Rise but was a bit concerned that 20 to one was on offer. Gary backed City Honours each way at 12 to one. Both of us elected to pay the betting tax on the investment rather than on the payout. High Rise beat City Honours by a head. The look on the face of the betting shop manager, as he paid us out, was worth as much as the pounds. Probably he was thinking: ‘Two Aussies not seen here before blow in and back roughies while electing to pay the tax in advance and then their outsiders finish first and second in the Derby.’

Sunday and it was back to Heathrow Airport, en-route to New York. On the way across the Atlantic Gary Pemberton decided that we should have a further planning session. Everyone gathered around his seat but this time with beers in hand. It looked a lot like a Sunday afternoon BBQ scene in Sydney. One of the British Airways stewards obviously did not like the situation and suddenly the Chief Steward appeared. The ABN AMRO representative took him aside and mentioned that the fellow in the middle of the somewhat noisy group was the Qantas Chairman. The Chief Steward handed out more beer and departed. A minute later and the Captain arrived checking ‘that all of his passengers were having an enjoyable flight’.

The stretch limos picked us up at the New York hotel at 8am on the Monday morning. There were six shows that day and the next. The security procedures for entering and leaving the skyscrapers made seven events in a day impracticable. Two shows were in the World Trade Centre building two: floors 31 and 72. Tuesday evening we flew to Boston. There were five shows for the Wednesday and then we had finished. At Boston Airport we boarded our American Airlines plane for Los Angeles. As the doors were about to close a large and loud American lady came in laden with carry-on bags. The cabin crew helped her find places to stow all of them. She sat down and the steward made the welcome aboard flight AA147 to Los Angeles call. The lady screamed: ‘what isn’t this plane going to Miami? I have to go to Miami.’ The consequent delay made us late into Los Angeles but the Qantas flight had waited for us. Early Friday morning we were all back in Sydney.

There is no way of knowing how necessary the TAB road show was for the success of the sale. A lot of the investment houses we visited did buy shares but many did not. Counting those who participated through video and audio teleconferences we must have exceeded presentations to over 100 investment houses and over 500 individuals. None of the hundreds of questions we answered were especially penetrating. Paraphrased the two most common ones put to me were: ‘How many people do you intend to sack once you are free of political control?’ ‘Why are you only staying for one year after the float?’ My response to the former was that we ran an efficient business and saw all our staff and agents as important. The reply they obviously wanted to hear was that many redundancies were planned as their concept was that TAB was a mature business and a bloated bureaucracy. For the latter I said I had wanted to finish in 1998 but had agreed to stay on for the float and the first year as a share listed company.