Mini millionaire factories

Fortune factoriesIt used to be that only Macquarie Group could lay claim to the title of Australia’s millionaires factory, but in recent years a host of challengers have emerged.

Engineering firm WorleyParsons contributes three members of the rich list (John Grill, Peter Meurs and Bill Paterson) as does Flight Centre (Graham Turner, Geoff Harris and Bill James). Online travel company has two (Graeme Wood and Andrew Brice) as does Harvey Norman (Gerry Harvey and Ian Norman).
But we can add a couple of new millionaires factories to the list. Mining services group Industrea, the newly floated Corporate Travel Management and Nathan Tinkler’s new coal venture, Aston Resources, have also turned managers into millionaires in recent times – albeit on a much smaller scale than Macquarie and WorleyParsons.
While the float and subsequent rise in Aston’s shares has been great news for Tinkler, it has also been good for two of the company’s executives, Todd Hannigan and Tom Todd.
Hannigan, who Tinkler brought over from Xstrata Coal, is the chief executive of Aston. Todd is a long-time Tinkler executive and serves as Aston’s chief financial officer.
Both men hold the same number of shares – 4.36 million. When Aston listed in August 2010 their stakes were worth just under $26 million, but they have since jumped to $37.8 million. Not a bad return in just five months.
Another recent float to create a little tribe of millionaires was that of Brisbane travel group Corporate Travel Management, which listed in December with an issue price of $1 a share and has since jumped to $1.70.
That’s obviously pleased major shareholder and company founder Jamie Pherous, who owns at 38% stake in the company now worth $45 million.
But this is very much a team effort – the top five shareholders at the time of listing were all CTM staff.
The second largest shareholder is Claire Grey, who is a director the co-founder of Travelogic, which CTM acquired in 2008. Her stake is worth $9.2 million.
Fellow Travelogic founder and CTM general manager of supplier relationships, Craig Smith, has a stake worth $8.8 million, while Victorian general manager Matt Dalling has a stake worth $6.5 million.
The general manager of CTM’s NSW business, Matthew Cantelo, is the company’s fifth largest shareholder with a stake now worth $6.5 million.
We expect executive-level meetings at CTM are a lot of fun when five of the key managers and directors are worth more than $75 million.
Industrea is as unlikely a millionaire maker as you are likely to find. With a market capitalisation of just under $497 million, it remains very much a small cap. However, the mining boom has fuelled a turnaround story that has helped make millionaires out of several shareholders.
The business was formerly known as GPS Online, named for its product that prevented collisions on mine sites and other industrial environments.
When current MD Robin Levison took control in September 2004, the company was all about the number two – its share were worth 2 cents, its market capitalisation was $2 million, its revenue was $2 million and its loss for the 2003-04 year was $2 million. In other words, it was a dog.
Levison’s approach was to tap into the mining services boom by piecing together a group of businesses that had good growth potential and experienced founders who were either looking to exit or in need of assistance to take the business further.
Over the next three years, he made a series of acquisitions of small mining services businesses. With little cash to play with (most purchases were accompanied by a capital raising for funding) he would pay for the deals in cash and Industrea shares. It was a way of getting deals done, and keeping the vendors involved in the business.
The vendors were required to take a leap of faith – but one that would prove to be rewarding.
Industrea’s first big buy was a company called Advanced Mining Technology, acquired in October 2005 for $7.5 million in cash and $2.5 million in shares, then worth just 4 cents (or 12 cents when adjusted for Industrea’s recent three-for-one share consolidation).
The vendors, Hendrikus Verhoef and Thomas Gilpin, ended up with 26 million and 20 million shares respectively. About 18 months after the deal, the company’s shares had more than tripled in value.
While Verhoef appears to have sold the bulk of his stake, Gilpin still has 2.7 million shares, which at Industrea’s current share price of $1.35 are worth about $3.7 million. His return on his original share parcel – worth just $800,000 – could be as much as $4.6 million when share sales are taken into account.
Another Industrea purchase was mining equipment supplier Wadam Industries, which was bought from vendor Dale McNamara in 2006 for $12.35 million, of which $4.3 million came in the form of Industrea shares.
McNamara remains a key member of Industrea’s management team as a special advisor to Levison. His family still owns $5.4 million of shares at current prices, but along the way he has made about $6 million from share sales.
But Industrea’s biggest winners are Graham and Linda Huddy, who sold their mining contracting business in 2008 for $250 million, $62 million of which was in the form of Industrea shares. The couple retain a stake worth about $64 million, but did sell a small number of shares last year.
Their total fortune is put at about $170 million, which suggests they could push for rich list inclusion in the coming years. 
The moral of the story is that going out on your own isn’t the only way an entrepreneurially minded person can become wealthy.
Sometimes hitching your wagon to the right growth company at the right time is just as effective.



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