Baird McConnon's quest to save Wrightson

Friday 21st May 2004

Iconic rural services company Wrightson is struggling against its peers and has just rejected an offer that would bring in long-term commitment and new talent.

Mark Peart speaks exclusively with reclusive millionaire Baird McConnon about his company's bid for control of Wrightson, why it needs some love and the excitement of working with Craig Norgate

Baird McConnon the big money behind Rural Portfolio Investments (RPI) is breaking the habit of a lifetime. He's giving a face-to-face in-depth interview.

And not only that, he's agreed to be photographed.

This is rare, uncommon behaviour for the traditionally reclusive 53-year-old Dunedin businessman.

The chairman of Dunedin-based RPI is joined at the pocketbook with former Fonterra Co-operative Group chief executive Craig Norgate in an aggressive bid for 50.1% control of ailing agribusiness company Wrightson. His company has about 13%.

Last year the Otago Daily Times wrote that the McConnons have "maintained a curt relationship with southern journalists and are renowned for their brief interviews which discourage any in-depth questioning."

That McConnon has agreed to be probed on his business and family background at all is an indication of how much the Norgate and McConnon family interests want to win the hearts and minds and wallets of Wrightson shareholders.

When I arrived at the McConnon family offices on the 10th floor of Dunedin's John Wickliffe House, Baird McConnon and his brother and chief lieutenant Alan were affable and hospitable, Baird answering questions for nearly an hour.

During the interview Baird McConnon hears that Wrightson chairman John Palmer has told his shareholders not to accept the RPI offer.

He is amused by that and bemused that merchant bank Grant Samuel has valued Wrightson at $1.61-1.86 a share, while Wrightson directors have opted for a more flattering range of $1.72-1.98 a share.

The question everyone has been asking RPI, and which so far has seen Norgate in particular ducking and weaving, is what kind of change is likely should the offer succeed? Will there be rationalisation? If so, what kind?

McConnon and Norgate are set to join the Wrightson board if their bid succeeds, so presumably they are the ones most au fait with the likely strategy.

McConnon says he doesn't want to go into detailed plans, then corrects himself.

"There's not a lot of detail at this point. The underlying thrust is that you take a wad of cash, invest it in the business. It's your skin that's in there, you get involved and make it happen. That to my mind is what the business seriously needs.

"There is no cornerstone shareholder in there that's involved. The business just needs to be loved.

"There have been a lot of 'gonna' statements. Over the last few months, hearing and listening and watching, it's all about what's 'gonna' happen."

McConnon says the business world has to move at pace these days.

"I think Wrightson's competitors are showing more signs of moving at pace than Wrightson is."

His displeasure at the Wrightson board's unequivocal repudiation of the RPI offer is palpable.

"To be honest, I'm disappointed. I would have thought that what we've been saying made good sense, that somebody coming in, putting a bit of skin into the business, getting around the table, putting some values in ... yeah, I'm disappointed by the result today.

"We would love to have turned up on the scene as a friendly party ... we have no desire to be destructive at all, we still think and believe the offer is a fair one. Our clear intent, which has been said a number of times, is that we see ourselves in there in the long-term. Mainland was a 50-year play there's really no reason why this shouldn't be a 50-year play too."

Given RPI's clear disapproval of Wrightson's performance, financial and otherwise, would a management cleanout be likely should the Norgate-McConnon bid prevail?

"No. And again, you'd want to get in there and put your gumboots and jeans on and get a feel for the people with the drivers. There's a lot of knowledge inside that organisation we want to be able to retain it and enhance it. Our objective is to build good sustainable value over time ... over years rather than months.

"What sort of role do I want to play in that? It really depends on what you see when you get there."

How does he perceive the Wrightson board? "They were all good guys until this morning," he says, chuckling.

What will the price of failure be, if the number of acceptances RPI needs isn't achieved? "A bloody nose. I refuse to accept that it might happen yet. I'll go home and kick the cat and start again on Monday."

As an afterthought, McConnon, roaring with laughter, quips: "It's just a pity we haven't got a cat anymore."

"There's nothing in what I've read so far that says we've got it wrong. In fact the gonnas have turned to the mights now. And to have something like a possible deal with Fonterra they've had three years to do that. It's obviously been too hard if it hasn't been able to be achieved in three years."

It's ironic that while Mainland Products is a New Zealand icon, its former principals, Baird and Alan McConnon are less so.

Yet it was Alan McConnon who when advertising agency Saatchi & Saatchi came up with the concept for the famous Mainland ads on television, was the key driver of their success.

Their father, Peter McConnon, one of New Zealand's early food technologists, started the company in Dunedin in 1954. Baird and Alan, both old boys of Kaikorai Valley High School (now Kaikorai College), were involved in the business early on.

"At the stage when we all headed off to university, we were doing part-time jobs at Mainland. While it was undergoing a growth spurt we both basically lined up the old man and said: 'This is a waste of time, let's sort this [Mainland] first and then we'll go back." Neither of them did.

Peter McConnon quickly discovered there were more user-friendly and profitable ways of packaging and preserving cheese than simply through bulk-packaging.

Baird McConnon: "He was well read enough to recognise that flexible packaging had started to come of age, and instead of having to take a 40-pound block of cheese to a grocer and let him carve it up, he could cut it up, put a wrapping around it and give it a shelf life."

From there, Peter bought a couple of vans and got into distribution.

In the mid-1960s the McConnons were happily exporting cheese to Australia.

That was until one day a Dairy Board official arrived and said to Peter: "I understand you're exporting cheese to Australia."

Baird: "The old man very proudly said yeah. The official replied 'Well, you better stop because you haven't got an export licence.' The board of course had the sole export authority for dairy products.

"Dad was pretty downcast about that, but as the guy walked out the door, he said, 'By the way how much have you been getting for it?

"He told him the price and the guy came and sat down and said: 'That's the best price we're getting for our cheese anywhere in the world outside the UK. Maybe we should talk about this a bit further.'"

Thirty years later, it was the former Dairy Board, along with the Otago Cheese Company and the McConnon family company Aorangi Laboratories, that had equal shares in Mainland.

In a story riddled with ironies, it isn't lost on Baird McConnon that Fonterra, the product of the 2001 mega-merger of the Dairy Board, Kiwi Co-operative Dairies and New Zealand Dairy Group, is also a minority shareholder these days in Wrightson through its subsidiary RD1.

The turning point came the late 1990s when Kiwi Co-operative Dairies came along, in the form of chairman John Young and chief executive Norgate. Kiwi was then making merger overtures to Tui Milk Products, which was ultimately successful and led to the dairy mega-merger.

"Craig Norgate's an amazing character in terms of being able to understand the value of value creation. We just went on this incredibly exciting ride, picking up the likes of South Island Dairy Farmers, Food Solutions [the former Huttons smallgoods business], the Invercargill milk co-operative [Southern Fresh] and then the launch into Western Australia with [ice cream maker] Peters & Browne.

"It was incredible, putting all those assets on board, shaking them, getting the teams motivated and going, and just watching the results flow down to the bottom line."

In September 2001, Baird McConnon became regional managing director, Australasia, for Fonterra subsidiary New Zealand Milk, having been chief executive of Australasian Food Holdings (Mainland, Tip Top and Peters & Browne). Bonland Dairies and New Zealand Milk's interests in the Pacific also reported
to McConnon.

The family maintained a minority holding in Australasian Food Holdings for another year, until it decided to sell out to Fonterra. The McConnons decided the time was right to exit. In any case, when Australasian Food Holdings became an Australian company, based in Melbourne, Baird as a "tried and true Dunedinite" didn't want to move.

"At the time that we took the cheque [from Fonterra] we were getting close to a turnover of about $2.5 billion. I don't think even in his [Peter's] imagination he could envision that sort of growth. He was a scientist first before a businessman, but the business side of it did come naturally to him. He was a person who was very aware of people and probably the thing that Alan and I took from him in that environment was people-awareness, customer-awareness.

"I think one of the things we can take a lot of pride in from the Mainland business is that it became an awesome team of people. The word empowered is well and truly overused these days, but it really and truly was an empowered business where the ideas used to bubble up from underneath."

Of Norgate, the voluble, hyper-active, eat-stress-for-breakfast businessman, the quieter, more reflective Baird McConnon says: "Craig always carries a vision that's right out there, and to date, in my experience with Craig, it's been amazing the way we've knocked off a good chunk of the pathway to get to that vision. Yes, you still need to test Craig and bring him down to workable action steps. He's just great fun to be involved with really."

Baird McConnon says he himself is a team person. "I get a real kick out of watching a team interact well and be self-motivated and go out to make it happen, and getting the buzz out of getting wins on the board.

"I've always seen my job as trying to clear the way for people to make things happen, rather waving your hands in someone's face and say you must do this. You get a much more successful result with the person if they're motivated to do it themselves."

So what's behind the carefully cultivated public image or lack of it? RPI has been using veteran Auckland financial PR man Barry Akers, but even he took four weeks to persuade McConnon to be interviewed.

"I don't know. I guess we sort of keep our business to ourselves. We don't really get a buzz about seeing our names splashed across the front of the paper. At the same stage though, you have to say there's an intense family pride at what we have achieved over the past 50 years.

"There's a driving ambition to have a few more successes. When we took the cheque from Fonterra, as a family we sat down and talked it through. You could have carved it up and everyone wandered away with their bit, but it's a reasonably tight-close family and the general feeling was that rather than break it up, why not keep it together.

Baird and Alan's siblings, David, Liz, and Rosalie, are passive shareholders in Aorangi.

"While we've got a few buildings and bits and pieces, we'd like to have one significant assets that we can be proud of. So what are Aorangi's assets? "Money in the bank, a few buildings, a few shares, an investment in Dunedin engineering firm DC Ross, and a couple of other small businesses.

"We have been looking around for a significant one and Wrightson appealed for a number of reasons. It's a business we have some sort of affinity for it's about customers and suppliers."

Given what the McConnon boys did for Mainland, perhaps the Wrightson board would be wise to reconsider.

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