stokes wetrac gets caterpillar nsw, page-3

wow there's more interesting read: re:stokes cater found this also:

The day after the opening ceremony of the Sydney Olympics in September 2000, Seven Network chairman Kerry Stokes was elated.

With his network owning broadcast rights to probably the most successful Olympics, the media boss invited several hundred guests aboard a luxury cruise ship moored in Sydney Harbour.

Among them were Peter Gammell, one of Stokes' senior executives, and five executives from Caterpillar, the world's No. 1 manufacturer of heavy equipment.

A Stokes privately owned company, Westrac, holds lucrative Caterpillar dealerships in WA and north-east China. So it was no surprise that Caterpillar executives were among those on the guest list that weekend.

But Stokes and some of his Caterpillar guests were talking about more than the 110-metre hurdles and the rowing. Stokes had long coveted Caterpillar's NSW dealership. Although not as big as the WA dealership - reported to be worth some $1 billion in annual sales - the eastern states' territory could easily add another $360 million to Stokes' heavy equipment business.


Despite Stokes's high-profile media interests, the heavy machinery business is far more important to him financially than his 37 per cent stake in Seven.

There was just one stumbling block to his ambitions. Another company, Gough & Gilmour, had held the Caterpillar dealership in NSW (and the ACT) since 1989.

But the NSW company had fallen out of favour with Caterpillar and - six weeks after the cruise ship meeting - the entire affair ended up in the NSW Industrial Relations Commission.

The ensuing 2 year court battle - instigated by Gough & Gilmour against Caterpillar - left few reputations untarnished, including Stokes's Westrac, amid allegations of "secret arrangements" and a "sham sale process".

A year before the cruise ship meeting, Caterpillar had told Gough & Gilmour it was unhappy with their relationship and wanted them to sell their business to a third party. Caterpillar would choose the buyer.

It chose Westrac. But, after months of tough negotiations, sale talks between a reluctant Gough & Gilmour and Westrac broke down. Frustrated he could not clinch a deal ahead of the Olympics, Stokes walked away from the negotiations.

Not long after, Caterpillar served Gough & Gilmour with a dealership termination notice, which threatened to cut off the NSW company's life blood.

The next day, on October 27, 2000, Gough & Gilmour launched legal action against Caterpillar of Australia in the NSW Industrial Relations Commission.

It claimed its contract with Caterpillar was unfair and it wanted to keep the dealership.

It said Caterpillar had not kept to its undertaking of helping the two owners, Harcourt Gough and Tony Gilmour, achieve a fair price in any sale of their business, and claimed there was some sort of secret arrangement between Caterpillar and Westrac.

Westrac's appointment as the new dealer, the pair claimed, was a pre-determined outcome.

In a primary judgement brought down by the commission last December, the court found that the talks between Stokes, Gammell and a number of Caterpillar executives - which came to light well into the case and almost by accident - were crucial to the case.

Information in that judgement and 14 others, including one brought down last week, showed how much effort Stokes was willing to make to expand his Caterpillar territory. The court rejected the Gough & Gilmour claim the Stokes organisation colluded with the Caterpillar executives to cancel the dealership to bring pressure to bear on Gough & Gilmour to sell.

But Justice Boland was left in no doubt about what transpired after the weekend cruise ship meeting. "Both the Stokes organisation and Caterpillar understood that the way forward was cancellation of the applicants' [Gough & Gilmour's] dealership and that the consequence of this would be to seriously weaken the applicants' bargaining position."

Justice Boland also concluded there was an understanding between the Stokes organisation and the Caterpillar executives that there should be no reference to the cruise ship in their affidavits.

"This is a serious matter and it is a conclusion I have not come to lightly," said the judge.

"However, it is beyond coincidence and belief that six men in the positions they held could forget, or consider it irrelevant, to mention the episode of the cruise ship in their affidavits given the prominence for both Caterpillar and the Stokes' organisation of the issue of the applicants' dealership and the fact that a meeting about the issue took place," he said in December.

Stokes was not a party to the proceedings and was not called to give affidavit evidence.

The court eventually found that Caterpillar of Australia had "proper grounds" to recommend to its US parent that the relationship with Gough & Gilmour be brought to an end because of a gradual deterioration in the relationship between the parties due in some part to Gough & Gilmour's "adversarial attitude".

But it also found that Caterpillar acted unfairly by failing to adhere to its own policy that dealerships would only be cancelled as a last resort.

"In my opinion, the respondent's [Caterpillar] conduct in the sale process and in taking the decision to cancel, was biased in favour of the Stokes' organisation and to a significant degree the applicants were left out in the cold," said Justice Boland in last week's judgement.

Gough & Gilmour now has until early September to decide whether it will sell its dealership. If it chooses not to, Caterpillar can terminate the arrangement with 26 weeks notice.

Gough & Gilmour, Caterpillar and Stokes have all declined to comment on the case. The commission is still considering costs and possible compensation for Gough & Gilmour.

However, Westrac is thought to still be Caterpillar's preferred dealer for the NSW/ACT territory.

In the early talks with Gough & Gilmour, Stokes was thought to have been willing to pay as much as $182 million for the business but by September 2000 a conditional offer had dropped to about $154 million.

After building up what was a struggling dealership into a successful business employing 825 people across the state and with property worth millions of dollars, Gough and Gilmour have always resisted selling their dealership.

Their initial investment of $7 million more than a decade ago is estimated to have achieved after tax returns of, on average, 34 per cent, a year.

Certainly something worth fighting for.