AUSTRALIA'S ACQUISITIVE RECLUSE Robert Holmes a Court spends a lot of time in his Perth study, pondering computer chess moves and takeover strategy. He's made a fortune buying corporate dogs.
By Louis Kraar RESEARCH ASSOCIATE Alison Bruce Rea

(FORTUNE Magazine) – HE'S THE OTHER voracious Australian, a corporate hunter with a $1-billion war chest who has gobbled up companies at home and in Britain and now is stalking in the U.S. But unlike Rupert Murdoch, who chases mainly publishing and broadcasting properties, Robert Holmes a Court, 48, will buy into any kind of company he thinks is undervalued. Holmes a Court has nothing like Murdoch's world-class celebrity either. While Murdoch has become a highly visible New Yorker, Holmes a Court pursues an almost reclusive life in Western Australia, spending much of his time in his rambling colonial house on the banks of the Swan River in Perth. ''I don't phone people,'' he says. ''They phone me.'' But dismissing Holmes a Court as a small-town operator is a mistake few chief executives get to make twice. Lord Lew Grade, chairman of Associated Communications Corp., one of Britain's largest entertainment conglomerates, welcomed Holmes a Court into his tent several years back. Before the British impresario knew what hit him, Holmes a Court owned the company and Lord Grade was looking for a job. Now Holmes a Court is pursuing Asarco, a troubled U.S. minerals company with sales of $1.1 billion for the past four quarters. He has paid $76.7 million for 11% of the company over the last year or so and is still buying. Asarco has thrown up all kinds of roadblocks and lobbed poison pills. Holmes a Court says he abhors such terms as friendly and unfriendly takeovers: ''That's introducing emotion into business. It's not a question of friendship but economic viability.'' Still, he warns, if Asarco persists with hostilities, ''the only way to protect our investment is to seek control of the company.'' His other big target is Broken Hill Proprietary, an industrial and natural resources conglomerate with annual sales of $4.9 billion that is Australia's largest corporation. He has bought 5% and is terrorizing BHP's management with criticism and legal action. Holmes a Court describes himself as ''a genuine entrepreneur in the economic sense,'' rather than as an American-style corporate raider. ''I don't see it as a game or an art form,'' he says. Instead, he professes to seek companies ''we actually want and know what to do with.'' According to Charles Bright of Potter Partners, a Melbourne brokerage firm, Holmes a Court follows two rules: ''An acquisition must produce profits within 12 months, and the quest for it should have as close to zero risk as possible.'' The strategy has worked wonders so far. Holmes a Court's net worth is estimated at $200 million -- most of it tied up in his nearly 50% stake in the ( Bell Group, a conglomerate made up of transportation, building supplies, entertainment, and media companies he acquired over the last 14 years. In the past five years, Bell Group's earnings per share have grown at an annual compound rate of 35%. Last year the company earned $35.6 million on $387 million in sales. The company also controls Holmes a Court's newest takeover machine, Bell Resources, essentially a portfolio of investments in minerals and petroleum. In 18 months the assets of Bell Resources have grown 16-fold to $767 million. But if his strategy is straightforward, his manner of operating is anything but. Most mornings Holmes a Court stays home, playing chess against a computer and plotting corporate moves. He has no No. 2. ''Who ever heard of a dictator with a strong deputy?'' asks a business associate in Perth. Unwanted calls on Holmes a Court's listed home phones are fielded by his wife, Janet. At the Bell Group office, a secretary dedicated to protecting his privacy takes messages. Puffing a Dutch panatela in his study, Holmes a Court says, ''When I'm ready to give something my full attention, I have people come in here.'' Tall and soft-spoken with an offbeat sense of humor, he rarely socializes without a business purpose. And though he collects art and classic cars and breeds racehorses, he insists, ''My relaxation is business.'' Most days he lunches on a sandwich in his study, a habit particularly out of step in a gregarious land whose inhabitants often display a special zest for good food and abundant drink. Even one of his sycophantic managers remarks, ''Rob leads a very un-Australian life.'' A former close friend who fell out with Holmes a Court over business differences maintains, ''The man hasn't got any soul.'' Many who have worked for him might agree. Though respected for his business mastery, Holmes a Court is not much loved as a boss. For one thing, he's a tightfisted employer -- and proud of it. ''Company money is not a different currency to be treated recklessly,'' he says. Even the Robert Holmes a Court Collection, over 1,000 pieces of mostly Australian art worth about $5 million, is administered by just one overworked curator. And insiders tell of stormy departures from Holmes a Court's companies. A Perth TV station manager got an hour's notice and was forced to turn in his company car immediately; his wife had to pick him up. Sir Larry Lamb, a flamboyant London editor hired to run Holmes a Court's newspapers in Australia, stayed only six months. Says Geoffrey Miller, a Perth barrister who has known Holmes a Court for years: ''He has no understanding of how the ordinary man thinks.'' Miller thinks Holmes a Court can be ''personally vindictive.'' Several years ago Miller resigned from the board of Holmes a Court's television company because he thought the boss was far too autocratic. Recently Holmes a Court's attorneys have tried to bar Miller from representing an applicant for an additional TV channel in Perth. Holmes a Court coolly brushes aside Miller's contention: ''I am too busy for personal rifts, frankly.'' While Rupert Murdoch is the son of a prominent Australian publisher, Holmes a Court's roots are not even in Australia. He was born in South Africa, the son of a British migrant farmer who prospered raising cattle. He seems uncomfortable about it. ''Birthplace has no relevance,'' he says. ''The next thing that follows is that people call one South African.'' He has no such qualms about his English roots. His name comes from the time of the Norman Conquest in 1066. A cousin is the present Lord Heytesbury, and Holmes a Court calls both his personal holding company and Perth stud farm Heytesbury. Rupert Murdoch is widely quoted as saying, ''The trouble with Holmes a Court is that he wants to be an English lord.'' Laughing, Holmes a Court says, ''I'm happy to be an Australian businessman, if that's all right with everybody.'' EVEN AS A YOUTH in South Africa, Holmes a Court tended to make his own rules. At Michaelhouse, an exclusive boarding school in Natal, he simply presumed he could have a car of his own, and school authorities did not object. He paid for it by giving rides home to fellow students. ''They gave me their air tickets, and I cashed them in,'' he recalls. He left South Africa for New Zealand, where he studied agricultural science. ''I really can't explain why,'' he says now. At 25, Holmes a Court moved to Perth and went to law school. At the University of Western Australia, he met Janet Lee Ranford, a vivacious science major, and later married her. They have four teenage children who attend boarding school near Melbourne. Perth seemed to fit the young Holmes a Court perfectly. A center of Australia's mining industry, it's a freewheeling capitalistic place without a stuffy establishment. He set up a law practice that gave fast service to mine operators. ''My first year of practice I earned more than the chief justice,'' he says. , In 1970 Holmes a Court spotted his first turnaround candidate, a particularly scruffy corporate dog called West Australian Worsted & Woollen Mills. Because the company was a major employer in the little town of Albany, 260 miles south of Perth, it had managed to get a lot of government loans, then couldn't repay them. He convinced officials that he could turn the company around, getting them to write off the loans. In what Holmes a Court calls ''my commercial apprenticeship,'' he got control of the mill for $83,500 and by installing new equipment made it profitable. Next Holmes a Court acquired Bell Brothers, an ailing supplier of construction equipment that was many times the size of the woolen mill. He worked four years to restore that company's health, creating the core of his present conglomerate -- and an appetite for more. In 1979 he almost got control of Ansett Airways, Australia's main privately owned carrier. Sir Reginald Ansett, the elderly chairman who supported him, balked at the last moment, and Holmes a Court threatened to sell his shares to Rupert Murdoch. ''You're being young and impatient,'' Ansett told Holmes a Court, who replied: ''I see it differently. I'm being decisive.'' Holmes a Court made a profit of more than $11 million by selling to Murdoch, who gained control. When he bid to take over Rolls-Royce a year later, the joke around Perth was that Holmes a Court wanted to speed up delivery of a car the company was building for him. He collects Rolls-Royces, owning, he says, ''half a dozen perhaps -- I forget.'' Though Vickers, a British manufacturing conglomerate, acquired Rolls-Royce, Holmes a Court turned a tidy profit on his stock. He played rough to get Lord Grade's London entertainment company. In 1981 Holmes a Court befriended Grade, who was then having financial difficulties. Holmes a Court bought nonvoting shares of Grade's Associated Communications Corp. and has since bragged that it took ''only 18 months before I owned it.'' He went on the board, quietly accumulated more stock, and tendered for the rest. But he denies that he betrayed Lord Grade: ''It was a clash of an old- style film mogul-entrepreneur with our more disciplined management style.''

British regulators rapped his knuckles for failure to disclose his stock purchases, but Holmes a Court shrugs off that episode as ''a minor breach.'' He paid about $85 million for the company, which includes London theaters, such box office hits as On Golden Pond, and a subsidiary called Northern Songs that owns rights to 211 Beatles songs. ''The assets were sound, but the management was not,'' says Holmes a Court. Bell Group, which carries Northern Songs on its books for $4.4 million, is now trying to peddle the subsidiary. Asking price: $50 million. Just two years ago his initial lunge at giant BHP appeared absurd. An Australian broker likened the attack to that of ''a flea trying to fight an elephant.'' Holmes a Court bid for BHP shares through Wigmores, a little- known regional distributor of Caterpillar products that he had just acquired. He offered to swap two shares of Wigmores, which had annual sales of $56.5 million, for one of BHP, with its $4.9 billion in sales. Holmes a Court got less than 1% of BHP in the first round. As the rest of his carefully conceived plan unfolded, he changed Wigmores's name to Bell Resources and eventually bought around 5% of BHP. Like a guerrilla fighter, Holmes a Court struck where least expected. He acquired an obscure, Bermuda- based company called Weeks Petroleum, which owns royalty rights to the oil and gas that BHP and Esso are pumping out of the Bass Straits between Australia and Tasmania. Contending that BHP and Esso shouldn't deduct excise taxes before calculating Weeks's share of oil and gas revenues, Holmes a Court has launched legal action that he says is potentially ''worth around $500 million to us.'' Even if he doesn't get that windfall, many institutional investors and his own advisers believe that Holmes a Court is capable of buying about 20% of BHP, which could well be enough to force a proxy fight. His strategy, after gaining control, is to break up the conglomerate into its various pieces, which he is sure will be worth more than the company as a whole. According to one BHP executive, the company now regards Holmes a Court as a ''worthy opponent.'' HOLMES A COURT thinks he sees undervalued assets in Asarco too. He insists greenmail is not his game in this first major American investment. If it were, he'd be disappointed. Asarco shares rose from $22 to over $25 after Holmes a Court appeared, but have recently dropped back. The company, a major producer and refiner of nonferrous metals, is a disaster area. It lost $286.4 million in the past four quarters, mainly because of flattened prices for metals. But the company also owns 44% of Australia's MIM Holdings. Though MIM is losing money at the moment, primarily because of depressed coal prices, it includes ! one jewel, Mount Isa mine, that caught Holmes a Court's eye. The highly efficient mine owns rich supplies of lead, zinc, copper, and silver. Because of low production costs and the advantage the relatively weak Australian dollar gives it in export markets, the mine is currently operating profitably. Evidently he thinks spinning off that Australian mine alone would give him a profit on his Asarco investment. Holmes a Court is still buying Asarco shares, and he says Bell Resources' $1- billion purse, including pledges from banks and investors in Australia, Asia, Europe, and the U.S., ''is more than enough to buy Asarco.'' But one of his advisers says, ''Rob is very comfortable sitting on 11% or so for years if necessary.'' Holmes a Court himself has expressed amusement at American reaction to his patient tactics. As he put it recently, ''They are just looking for me to play according to their rules and make it a big game. The Viet Cong didn't play by the rules, and look what happened.'' Sitting by his computerized chessboard and weighing options, Holmes a Court prefers to be judged on his company's performance. ''Quite honestly, I find it barren to go beyond that,'' he says. Holmes a Court is out to stamp his brand of unemotional capitalism on whatever he buys. BOX: INVESTOR'S SNAPSHOT ASARCO SALES (LATEST FOUR QUARTERS) $1.1 BILLION CHANGE FROM YEAR EARLIER DOWN 26% NET LOSS $286.4 MILLION CHANGE LOSS YEAR EARLIER RETURN ON COMMON STOCKHOLDERS' EQUITY -42% FIVE-YEAR AVERAGE -1% RECENT SHARE PRICE $22.50 PRICE/EARNINGS MULTIPLE N.A. TOTAL RETURN TO INVESTORS (12 MONTHS TO 8/2) 5.73% PRINCIPAL MARKET NYSE Explanatory notes: page 106