Reports that diversified billionaire Kerry Stokes was a possible buyer of Fortescue Metals Group’s heavy machinery provide a classic lesson in how the rich invest: keep cash handy so when others run out of it you can buy assets at below market price.
Last Friday’s Australian Financial Review newspaper suggested that Fortescue (one-third owned by fellow Rich 200 member Andrew Forrest) was considering selling the equipment it uses in its mines and leasing it back to increase liquidity and ensure that it can pay its debts.
Fortescue has faced a big fall in the iron ore price, which has made its mines a lot less profitable.
Swooping in when others are struggling is a common move by very wealth entrepreneurs (think Kerry Packer and Alan Bond).
Doubts have been raised about whether the deal will go ahead but expect Stokes to remain on the lookout for value. His majority-owned WesTrac business is one of Australia’s great successes in mining services and he understands the market better than most.
Stokes is also in the process of applying another standard Rich 200 plan: long-term succession from father to son.
Last month Ryan Stokes (Kerry’s son) was appointed chief operating officer at Seven Group Holdings in a move that formalises the high-profile role he is playing in the management of his father’s affairs.
Last year Frank Lowy stood down as executive chairman of Westfield Group to allow his sons Peter and Steven to assume control (Frank remains on the board in a non-executive capacity).
Lindsay Fox’s son Peter is the executive chairman of the Linfox Group.