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APRIL 14, 2000 VOL. 26 NO. 14 | SEARCH ASIAWEEK

All Aboard for the New-Economy Express
Has Brierley missed the train?
By ASSIF SHAMEEN Singapore

Give Brierley Investment this much: Having fallen precipitously from a perch as one of the six largest companies in Asia-Pacific outside Japan in the mid-1980s and struggled during much of the 1990s to find a workable strategy to recapture past glories, the company is hanging in there. Brierley recently moved its headquarters from Wellington to Singapore, began the process of selling old-economy assets like its 47% stake in Air New Zealand and made plans to invest heavily in e-commerce. Brierley's is a bold effort by an old-economy company to remake itself.

It won't be easy. To start with, the company's asset sales, which will give it the cash it needs to fund its new direction, have started slowly. Besides Air New Zealand, Brierley's other prime assets include an Australian construction-materials company with major U.S. holdings, a New Zealand fishing company and Britain's largest hotel chain, Thistle Hotels. The company plans to sell all of them except the hotel chain but has acted only on the yet-unsold airline. Finally, some analysts question whether Brierley has decided to jump on the dotcom train too late.

In the 1990s, critics say Brierley often failed because it tried to be all things to all people: The company held stakes in 60 separate entities as recently as June 1998. Through the years, some investors have taken a chance on Brierley stock because they see a company just waiting to be raided and sold for parts, which they figured were worth more separately than together under the Brierley umbrella. But a wholesale sell-off never happened. Even today, Brierley remains a diverse conglomerate in a world where conglomerates are distinctly unfashionable. "Their problem is that they have been all over the place," says Simon Gresham, an analyst with Merrill Lynch in New Zealand.

Brierley's CEO, Australian Greg Terry, has been on the job six months and won't make excuses for the company's performance before he arrived. But he does defend conglomerates in general: "Tell Warren Buffett that conglomerates or investment holding companies like ours have gone out of fashion." But hasn't Buffett's Berkshire Hathaway been getting bad press about its poor performance and criticism for its weak technology focus? (Buffett himself apologized recently to investors for the fund's lackluster record.) Answers Terry: "I can't speak for Mr. Buffett, but at Brierley we are trying to get our focus right."

Brierley recently announced a loss of $41.6 million for the six months ended December 1999. However, the loss can be blamed on a $76-million write-down on unlisted investments, and analysts expect a $75 million profit for Brierley when its fiscal year ends in June. Nevertheless, says Gresham, the restructuring "is too little, too late. We had expected by this stage to see not just a write-down in book values, but also some divestments."

Easier said than done. Brierley has been negotiating for weeks with both Singapore Airlines and Qantas, the dominant Australian airline, to sell Air New Zealand. Although the New Zealand flag carrier certainly has its attractions to both of the bigger airlines negotiating for it, the hidden battle may be for Air New Zealand-owned Ansett Airlines, Australia's only other domestic airline. SIA would like to gain access to Australia's in-country market, where air travel is expensive and profitable; Qantas wants to keep SIA out. Negotiations are currently on hold for a few weeks until Air New Zealand completes the full takeover of Ansett.

Most analysts doubt that Brierley will see a dime from an Air New Zealand sale sooner than six months - possibly a year. Brierley says it also plans to sell its controlling stake in James Hardie, an Australian building-materials firm with most of its assets in the U.S., but it is in no hurry. Terry says that Brierley's stock is actually worth twice what it is now trading at. Since the close of its first Singapore-trading day, March 29, the stock price has fallen 25%. And going back to three years ago, when Brierley traded on the New Zealand stock exchange, the current price is roughly 67% lower. "We recognize that we need to re-establish our credibility, otherwise we risk disappearing from the face of the earth," says Terry.

Pressed for details on exactly what Brierley plans to do in its e-commerce endeavors, Terry offers two specifics. First, the company plans a stake in U.K.-based Fine Arts Development, which sells giftware over the Internet. He expects that company to be compatible with the hotel chain: "When you go to one of our hotels you can order a gift for a loved one from your room and it will be delivered within six hours. Now that's synergy." He also mentions fishmonger.com, a business-to-business portal planned by the company to make use of its New Zealand frozen-fish production assets. Is this the beginning of a refocused, New-Economy Brierley that is showing others how to retool for the age of the Internet? Or is it the tardy attempt by a struggling conglomerate to find a strategy that will excite investors? Brierley is not the only company whose fate hangs on the answer to just such a question.

Write to Asiaweek at mail@web.asiaweek.com

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