The Harder They Fall

By Janice Castro

Robert Holmes a Court, Australia's first billionaire and one of the world's most fearsome corporate raiders, was renowned at home as the Great Acquirer. In the U.S., his targets were the giants USX and Texaco. But when he arrived in his gold-toned Rolls-Royce for a meeting of his corporate shareholders last month in Perth, Holmes a Court, 50, had acquired a new identity: the Great Disposer.

Holmes a Court was not at the meeting to announce yet another daring takeover but to concede the end of his boldest dream. In just eight minutes, the raider crisply laid out plans for his Bell Resources company to sell -- at a $206 million loss -- most of its 28% stake in Broken Hill Proprietary, Australia's largest company (1987 revenues: $6 billion). Holmes a Court had patiently stalked BHP, a vast mineral and energy conglomerate, for nearly five years, aiming to use the company as the foundation for a global natural- resources empire. His decision to sell was poignant evidence of the changing fortunes wrought by last October's stock-market crash, in which Holmes a Court's empire was perhaps the world's single largest loser.

A week earlier, complying with a directive from Australian stock exchanges for all companies to disclose the damages they suffered in the crash, Holmes a Court gave a stunning account of his companies' net losses, now estimated at $1 billion. Holmes a Court described how his principal companies -- Bell Group, Bell Resources and J.N. Taylor Holdings -- suffered an avalanche of falling stock prices in their wide holdings in energy, banking, mining and retailing. As the Holmes a Court companies took losses on these investments, their own shares collapsed as well. The stock-market value of the Holmes a Court corporations plunged from $4.1 billion to $850 million. "We found ourselves," he told Bell Group shareholders last December, "in the eye of the cyclone."

His empire had a critical weakness: it was constructed largely of passive investments in other companies' stock, rather than outright ownership of plants, equipment and other hard assets. Half of the Bell Group's pre-October assets of $1.8 billion, for instance, were made up of corporate shareholdings. "We were overexposed to the world's stock markets," Holmes a Court has conceded. Moreover, since the raider did not own controlling interest in those corporations, he was unable to tap their corporate credit lines to get infusions of new money. Said he: "Our money was tied up without getting cash flow or profits."

Reeling from Oct. 19's plunge, Holmes a Court suffered a devastating blow four days later when Merrill Lynch canceled plans to raise $720 million for him by issuing low-interest securities. In the days before the crash, the Merrill Lynch debt issue seemed destined to give Holmes a Court the buying - power to finance his planned intercontinental behemoth. Even after the crash, the money might have helped him hang on to the investments he had already acquired. But without the financing, he was forced to meet obligations by selling off stocks at the worst possible moment, when they were still depressed from the crash.

Yet Holmes a Court (the name dates from the Norman Conquest, in 1066) carried out his fire sale with characteristic decisiveness. The first glittering piece of his empire to go was his 10% holding in Texaco, valued at more than $800 million before the crash. Holmes a Court sold half his shares to U.S. Financier Carl Icahn in November for $360 million, at an estimated loss of $65 million. Other items: an 8% stake in the British retailer Sears PLC, sold for $300 million (loss: $41 million), and a 16% stake in Australia's Pioneer Concrete Services (loss: $54 million).

At the same time, Holmes a Court was forced to tear up his shopping list of future purchases. In February, he withdrew from a $337 million deal to buy a group of newspapers and radio stations from John Fairfax Ltd. But the most stunning move was his retreat from the long, often bitter struggle to gain control of Broken Hill, known as the Big Australian.

Holmes a Court's coming-to-grips with his situation seemed to salvage his reputation somewhat in the financial community. Said the daily Australian Financial Review: "The savage write-downs . . . are no more than tough-minded demolition and site clearing to facilitate clean rebuilding of the group." In fact, Holmes a Court may thrive once again as the lord of a humbler empire, but his brief reign as a globe-straddling raider appears to be finished for good.

With reporting by John Dunn/Melbourne