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Big Punt Failure, As Another Harvey Norman Investment Bites The Dust

If Gerry Harvey’s punting is anything like his recent investments he’s going to have a shocking day at the Melbourne Cup today after a Harvey Norman investment was flogged off this week.

As the administrators mop up his Coomboona Dairies mess the Harvey Norman Chairman is facing a hostile AGM next week, after it was revealed that he used Harvey Norman money to buy a half stake in the dairy business in 2015 for $34 million. he then used Harvey Norman money to fund a major share of the continuing losses for several years, and in May bought up Coomboona’s $36 million in bank debt from NAB.

All up, Harvey Norman has tipped some $125 million into the operation, but has only managed to recoup a third of this investment for Harvey Norman shareholders taking the hit.

According to the AFR there is one good thing for shareholders and that is the debacle isn’t costing Harvey Norman shareholders any more cash. And as for Alex Arena his 50% partner in the dud deal he’s ducking for cover and has not been seen even by the administrators.

Last week the dairy and breeding operations, were sold to Freedom Foods, owned by billionaire farmers Tony and Michael Perich.

In the end $28.78 million of the $74.99 million in total debt was written off in June, $50.2 million in debt remained on the books.

Last week, Harvey Norman informed the market the final sale amounted to $5.9 million less than those debts.

Which puts the final price for the dairy and breeding operations at either $44.3 million or $39.3 million, depending on whether an additional $5 million Harvey Norman tipped in a few weeks ago to pay unsecured creditors (Bolton’s Hoof Trimming et al) is being counted.

The AFR said “It’s not just the farm’s extraordinary lack of success that remains intriguing. In their group administrators report from late August, the administrators at Ferrier Hodgson referred to their difficulties “attempting to secure delivery of the group’s books and records”, which “certain third parties” haven’t provided. Who could have them? Zorro?

Another oddity: Harvey Norman’s unexplained decision to buy up all of NAB’s debt in the operation last May. By making itself the first secured creditor, Harvey Norman gained more control over the administration process, and was able to prevent a fire sale of the assets held by Coomboona. But with the sale not even recouping the debt on the whole operation, those benefits didn’t come cheap.

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