After decades of stitching up deals, New Zealand’s media-shy billionaire Graeme Hart spent much of 2020 slowly unpicking his biggest.
He created a titan in Reynolds Group Holdings, coming within cooee of toppling Switzerland’s Tetra Laval as the world’s biggest food packaging group when his firm’s annual revenue peaked at almost US$14 billion in 2013.
The group's genesis was in the 2005 takeover of Carter Holt Harvey when his Rank Group bought International Paper’s controlling stake in the NZ paper, packaging and forestry firm.
In a rare public outing in 2017, Hart told Otago University graduates that deal laid the groundwork for him to buy International Paper’s beverage packaging unit a couple of years later.
“They chose us – why? The reason was because we had dealt with them in a very straightforward manner when they were selling us Carter Holt. We said what we said we would do, and our reputation went before us,” Hart said in his keynote speech, when receiving an honorary doctorate from the university.
Hart went on to buy Alcoa’s packaging and consumer divisions, and Swiss company SIG. He then turbo-charged the buying spree with the leveraged buyouts of New York-listed Pactiv and Graham Packaging for about US$10 billion and topped it off with Canada’s Dopaco in 2011.
Hart described Reynolds as a “wonderful business” and a “formidable group” in the 2017 address.
This included the bold move he took in mounting the 2010 bid for Pactiv in the depths of the global financial crisis – “the most frightening period of my commercial life” – to create a business of real scale, with “large market shares and synergies – a beautiful thing.”
A hefty price tag
All told, Hart and his lenders spent more than US$20 billion building the packaging empire, and there were some short-lived rumours that an initial public offering was on the cards in 2014.
Those were quickly laid to rest when long-time lieutenant Thomas Degnan told analysts investment banks had been hired to help whittle down the mountain of debt, which was about US$18 billion at the time.
From there, Hart slowly sold down parts of the business – the biggest being the 2015 exit from SIG for US$4.23 billion.
By the end of 2019, Reynolds Group had reaped about US$5 billion from various asset sales to rein in total debt to a more manageable US$14.3 billion, while generating more modest annual revenue of US$9.7 billion.
This year, Hart dialled back his exposure even further, carving out Reynolds Consumer Products for an initial public offering in January. This raised US$1.17 billion at US$26 a share for a 23 percent stake of the producer of consumer packaging products such as Hefty rubbish bags.
Then in September, he split up the packaging group further, listing the renamed Pactiv Evergreen in a US$546 million IPO at US$14 a share. Hart again kept 77 percent of the food and beverage packaging group.
Of the original Reynolds Group Holdings, Hart still wholly owns plastic container maker Graham Packaging Co.
Slowing down?
In fact, the other arms of Hart’s personal empire were shrinking too. Carter Holt Harvey sold its pulp and paper business to Japan’s Oji Holdings in 2014 for $1.04 billion, and toyed with the idea of re-listing the trans-Tasman timber processing and building supplies businesses the following year.
That float had the plug pulled because the market environment wasn’t right, but Carter Holt also had the Ministry of Education’s leaky school’s case hanging over its head, which was only settled this October after years of preliminary legal battles, including a couple of trips to the Supreme Court.
Hart’s attempts to build an autoparts empire also stalled when the UCI Holdings arm filed for bankruptcy 2016 after it missed an interest payment on a bond.
Hart never got around to integrating UCI with Fram Group, which was quietly sold in 2019 to Trico Group – the 103-year-old company that invented the windscreen wiper – eight years after he bought the pair of companies for almost US$2 billion.
As the footprint of his businesses contracts, it’s easy to wonder whether the sun is setting on 65-year-old Hart’s empire.
The two prospectuses provide a clue to what the future holds – at least for the packaging companies.
Throughout the past year, Reynolds Group documents have talked of its ultimate owner being Graeme Hart – singular.
The two offer documents launched this year go beyond simply talking about Graeme Hart, and show the family will retain control for some time to come.
A family affair
Both the Pactiv Evergreen and Reynolds Consumer Products prospectuses show the Hart family will continue to control the company, provided they own at least 40 percent of the stock.
While they own more than half the companies’ shares, they can appoint all board members of both companies; at more than 40 percent they dictate the majority and size of the board, the firms’ levels of debt or major share issues, whether large transactions can be done, and the level of capital spending.
The family can also hire and fire both companies’ chief executives and chief financial officers.
In fact, the family will keep board representation provided they own at least 10 percent – it ratchets down at different levels – and even at 5 percent they’re entitled to get certain information and have access to senior management.
No longer do the companies talk of Graeme Hart. Instead, it’s “Mr Graeme Richard Hart or his estate, heirs, executor, administrator or other personal representative, or any of his immediate family members or any trust, fund or other entity which is controlled by his estate, heirs, any of his immediate family members or any of their respective affiliates.”
This has all the elements of building a family dynasty to rival the Wellington-based Todd clan.
It should have been obvious.
Back to the future
In 2018, Hart and son Harry started building a new food ingredients group, Walter & Wild, buying Hubbard Foods, Hansells Food Group and the Gregg’s sauce unit in three separate deals.
Hart senior had already provided seed funding to daughter Gretchen Hawkesby and her husband, Duncan, when they bought transport and logistics firm Fliway, which was later listed then taken over by Singapore’s Yang Kee Logistics.
Even Carter Holt is going through changes. Rakau Building Supplies Holdings, which sits above Carter Holt’s LVL, plywood and building supplies companies, was recapitalised in July with a share conversion followed by two share issues which more than doubled the number of shares on issue.
Whether that’s an indication Carter Holt could return to the ASX and NZX is unclear. The timing is right with equity markets at all-time highs and advisory firms said to be working overtime while they field interest from potential new listings.
Hart has kept a remarkably low profile over the past couple of decades.
That could in part be down to the importance he places on reputation.
In his 2017 address, he urged the young graduates to always be straight in their dealings and to follow through on their promises.
“Guard your reputation jealously. Critically important as you go through your career – years to gain, minutes to lose.”
A family motto of the country’s next dynasty perhaps?
