Analysis: Nearly 40pc of our top companies have gone since the GFC, but it’s not because they went broke!

KEY POINTS …

Of the 33 ASX 100 companies taken over since the GFC, about a third ended up in foreign hands

While the GFC sparked much of the takeover activity among weakened companies, very few were bankrupted

The ASX top 10 is remarkably stable, with seven remaining in place from 12 years ago and six from 100 years ago

ANALYSIS

ASX’s big churn sees 40pc of the top 100 shares disappear since the GFC

By business reporter Stephen Letts

1 AUGUST 2019

Early morning light hits the skyscrapers of Melbourne's CBD, as seen from above.

PHOTO: The “top end of town” has seen big changes in ownership since the GFC. (ABC News: Jane Cowan)

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The 12 years it has taken the ASX 200 to regain its pre-GFC high has seen an extraordinary churn in the big end of town, with almost 40 per cent of the largest corporates disappearing.

Key points:

  • Of the 33 ASX 100 companies taken over since the GFC, about a third ended up in foreign hands
  • While the GFC sparked much of the takeover activity among weakened companies, very few were bankrupted
  • The ASX top 10 is remarkably stable, with seven remaining in place from 12 years ago and six from 100 years ago

Liquidations and takeovers saw 37 of the top 100 from November 2007 drop off the ASX boards.

While credit markets seized up, threatening the existence of many heavily indebted companies, perhaps surprisingly, only four of the top 100 were bankrupted.

The vast majority of the deletions were due to takeovers, by either offshore raiders or other ASX-listed businesses.

Roughly a third of the ASX 100 companies taken over since the GFC ended up in foreign hands.

The blue chips in the top 10 have proved to be a resilient bunch — six are still there, with only Westfield disappearing via a series of complex restructures and takeovers.

20072019
RankCompanyMarket capRankCompanyValue
1BHP Billiton$130.7b1BHP$134.8b
2CBA$81.0b2CBA$101.8b
3NAB$70.8b3CSL$71.6b
4Westpac$57.9b4Westpac$69.2b
5ANZ$56.6b5NAB$56.9b
6Rio Tinto$52.5b6ANZ$54.3b
7Westfield$42.8b7Telstra$32.0b
8Woodside$36.0b8Wesfarmers$31.8b
9Telstra*$28.6b9Woolworths$30.8b
10QBE$28.2b10Macquarie Group$30.5b

*Telstra had a separate listing for T3 instalments valued at $42.8b which converted to ordinary Telstra shares in June 2008 with a combined value of $75 billion.

Source: S&P Global, ASX

The abhorred

Babcock and Brown had the sharpest fall from grace.

The financial conglomerate was a market darling with the sobriquet, “The Mini-Macquarie”. In its pre-GFC pomp, Babcock and Brown was valued in excess of $9 billion.

Separately listed satellites, such as Babcock and Brown Power, also lurked in the ASX100 and were worth a couple of billion more.

They were liquidated as a valueless, complex mess by 2010.

About the only surviving trace of the Babcock and Brown model can be found in its windfarm business. It emerged out of the wreckage as Infigen.

ABC Learning’s demise was just as ugly and swift, blowing up about $3 billion of investor funds.

The remnants of the corporate kindergarten were purchased, ironically enough, by a group of not-for-profit organisations.

They are now successfully providing low-cost care for pre-schoolers at more than 600 centres around Australia.

The absorbed

Around a third — 33 to be precise — of the ASX 100’s class of 2007 were taken over.

ASX’s long march

ASX's long march

It has taken the ASX 12 years get back to its pre-GFC high, more than double the time Wall St took. Stephen Letts explains why.

This group could be roughly split into two camps.

  1. The lamented — investors were probably happy enough to hold on to their stock, but pocketed handy capital gains anyway.
  2. The lamentable — companies salvaged at a fraction of their peak value by scavengers before the corporate garbage removalists moved in and took whatever money was left in the form of a liquidator’s “tip fees”.

Westpac shelling out $18.6 billion for St George Bank back in 2008, when it was number 14 on the ASX 100, was one takeover where investors reaped a handsome return, just in time to avoid the crash.

Australian-listed AXA Asia-Pacific was mopped up by its French parent in 2011, which then flicked the local AXA wealth and life insurance businesses to AMP.

It wasn’t the best deal for AMP, but then again the entire past decade at AMP has been rather unfortunate.

The wealth manager has slid from number 16 with a market capitalisation of almost $20 billion, to around number 80 (depending on the day) valued at less than $4 billion.

The big winner in the AXA deal was NAB, which saw its $14 billion bid rebuffed. Every so often NAB investors get lucky.

Surfwear business Billabong had a long and tortured departure from the ASX.

How Billabong’s star went from million-dollar man to jail

How Billabong's star went from million-dollar man to jail

Matthew Perrin was worth at least $50 million and was living the high life on the Gold Coast. But his fall from grace was mighty.

It traded above $60 a share before the GFC. It was finally scooped up by a US rival last year for $1 a share.

Other big companies sold overseas included:

Along the way, Australia’s two biggest brewers — Fosters (A.K.A. Carlton and United Breweries) and Lion Nathan — were also both swallowed by offshore interests. After a bit more reshuffling, both are now owned by Japanese giants Asahi and Kirin respectively.

Competition narrowed in gaming, with Tabcorp taking out Tatts, and in the media: West Australian Newspapers was taken over by Seven West Media, while the old PBL, slimmed down to Nine Entertainment, ultimately gobbled up Fairfax.

Coles went through Wesfarmers’ revolving door and ended back out on the street.

Wesfarmers shrinking to grow

Wesfarmers shrinking to grow

Wesfarmers is going back to the future spinning off Coles, but will it pay off?

Wesfarmers bought Coles Myer in 2007 (and not from the bargain bin) only to deem supermarkets not a brilliant growth opportunity, spinning Coles back out as a separate listed entity last year having turned the struggling grocery business around — at least somewhat.

Second-tier miners kept investment banks and lawyers busy, generating a flood of fees along the way.

Newcrest took over Lihir (and probably wishes it didn’t), Zinifex and Oxiana merged to create Oxiana, while Onesteel (later known as Arrium) was purchased out of receivership with shareholders ending up holding worthless bits of paper.

It was an all-too-common theme.

The once high-flying property trust Centro endured a near-death experience before resurfacing as Federation Limited, only to be merged with CFS to become Vicinity Centres.

A fraught restructuring saw Centro investors claw back 5 cents in the dollar, and share the proceeds of a $200 million class action against the company and its auditors. The fact it was a record settlement was probably of little comfort.

The adored

But it wasn’t all gloom. Some companies skated through the past 12 years enriched, almost blithely untouched by the GFC and its aftershocks.

Back in November 2007, CSL was Australia’s 15th most valuable company, with a market capitalisation of $19 billion. Today it is number six and worth more than $100 billion, a better-than 500 per cent return.

It is a similar story at Cochlear, but both are shaded by the 700 per cent gain by another globally focused healthcare innovator in Resmed.

But that’s the miracle of being able to fund growth out of cash flow, rather than debt.

EMBED: Healthcare vs other sectors

BHP maintained its number 1 ASX ranking.

However, the ups and downs of the commodities cycle has seen its market value effectively going nowhere.

Fortescue has been the standout amongst the big miners, jumping from number 47 into the top 20. Over the past 12 years its shares have risen by just over 50 per cent.

However, if you go back a couple more years, when you could pick up Fortescue shares for less than 1 cent, you’d be sitting on a gain in excess of 11,000 per cent, assuming you held on to them.

Over the narrower confines of the post-GFC world, tech stocks have delivered the most substantial gains.

Staring down the bears

From stocks to bonds, iron ore to bitcoin and Greek banks, the first half of 2019 has seen a global bull market, but can it last economic fundamentals remain weak?

Speech recognition business Appen wasn’t around during the pits of GFC despair. It has put on a handy 4,800 per cent since listing early in 2015.

Aerial map provider Nearmap flatlined, unloved before, and through most of the GFC. However, just recently it has taken off — up 3,500 per cent.

The floored

If there is an award for tenacity, it might just go to mining services business, Boart Longyear.

Having listed just before the financial storm hit, it soared up to almost $19 a share, before being floored.

It’s been wobbling along at 1 cent a share, or lower, for the past couple of years and just this week had its loan facility extended from $25 million to $75 million.

Unlike other businesses during the GFC, when Boart Longyear found itself in a hole, it just kept digging.

The moored

For the historically minded, the stasis in the top 10 is nothing new.

Wind the clock back 100 years or so, as Reserve Bank researcher Thomas Matthews did recently, and you will find that six of the top 10 are still there.

Despite the recent shakeout, over time Australian-listed companies have been surprisingly hardy.

“The average listed company in Australia today is 105 years old, compared with 77 years in Japan, 82 in the United States and 95 in the United Kingdom,” Mr Matthews noted.

1917 Sydney stock exchange(Rank by market cap)2019 ASX(Rank by market cap)Notes
1. Bank of New South Wales4Merged with Commercial Bank of Australia in 1982 to form Westpac
2. British TobaccoNADelisted from ASX in 2001 following acquisition; British American Tobacco currently listed in the United Kingdom
3. Bank of Australasia6Merged with Union of Australia Bank in 1951 to become ANZ
4. Union of Australia Bank6See above
5. Colonial Sugar Refining Co137CSR these days sells building products, having sold sugar refining operations in 2010
6. Commercial Bank of Sydney5Merged with National Bank of Australasia to become NAB in 1982
7. Broken Hill Proprietary1BHP is the world’s largest diversified miner
8. Union Steam Ship Company of New ZealandNAAcquired by P&O and later closed
9. Howard Smith8Known these days as Wesfarmers after being taken over in 2001
10. Mount Lyell Mining95Known these days as Iluka Resources after several rounds of takeovers and mergers in the interim

Source: RBA

SOURCE: https://www.abc.net.au/news/2019-08-01/asx-winners-and-losers-since-the-gfc/11345876

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