One man is an Island

by Andrew Fraser, The Weekend Australian on 25 Apr 2005 Bob Oatley's unhappy four-year flirtation with public markets ended yesterday. In an exclusive interview, the billionaire tells Andrew Fraser he'll now turn his attention to revitalising Hamilton Island.

BOB Oatley is sitting in the back of a golf cart, driven by son Sandy, tooling around Hamilton Island and pointing out local landmarks.

There's the house of late Beatle George Harrison. There's the north-facing point where he wants to put a yacht club, and here is where he wants to remodel the island's marina so it can accommodate bigger ocean-going yachts - and more of them.

‘It's a great place, very private, that's very important here,’ he says of Harrison's house, nestling in heavy vegetation that hides it from prying eyes but still boasting a fantastic view north over neighbouring Whitsunday Island.

’Over there is where Northpoint will be,’ he says, ‘and that (he indicates Dent Island, 1km offshore to the west) is where the golf course will be.’

Oatley shares the late Beatle's obsession with privacy. Until 2001, when he sold the family's Rosemount wine business to Southcorp for $1.5 billion, he had worked in private companies and relished the anonymity they afforded.

With the sale of his 18.8 per cent holdings in Southcorp to Foster's earlier this year, he's now out of the spotlight occupied by public companies (and particularly the ailing Southcorp) and back running his own race.

Oatley may be Australia's 10th-richest man, with a personal fortune estimated at $1 billion, but if someone like Harrison can wonder around Hamilton Island without being recognised - as he did - then Oatley is similarly anonymous.

Eighteen months ago he bought Hamilton Island for $198 million, moving on to his third career at the age of 76.

‘We ran a very successful business in New Guinea where we were the largest exporters of coffee, which was the country's major product,’ he says.

‘We started that business off with nothing, and it became the largest business in New Guinea.

‘We needed something new to do, so we started the vineyard. We didn't have one vine ... we planted them. That became the most successful vineyard in Australia and led Australian exports, and now we're one of the major producers of wine in the world.

`Then we sold that business and now we've got this one.’

Sitting on the back of the golf cart as it dawdles up one of Hamilton's steep hills, Oatley insists there's actually not much difference between exporting coffee from PNG and making and exporting wine from Australia.

‘What they're both about is blending - you have to get the blend right when you're making coffee and getting the blend right is even more important when you're making wine. Then after that it's a matter of marketing.’

Cars are actively discouraged on Hamilton Island, and Oatley's cart bears the distinctive registration `Wild Oats’ - the same name as his 60-foot racing yacht. ('With a name like Oatley I got called Oats at school and it's stuck,’ he explains.)

His companions in the golf cart are his two sons - Ian and Andrew (generally known as Sandy). They are also his constant business companions.

Even though both are in their 50s - and Sandy is chairman of the company that owns Hamilton Island - Bob Oatley still refers them as 'these boys’.

Family is very important to the Oatleys, but family loyalty, in the past, has come at a cost. Aside from his two sons, Bob has a daughter, Ros, whose husband, Keith Lambert, was installed as chief executive of Southcorp when Rosemount executed its effective reverse takeover of the listed company.

It proved to be a disastrous appointment - and one Bob Oatley won't talk about with The Weekend Australian. Lambert's discounting strategy emasculated great Australian wine brands such as Penfolds, slicing market share and margins at the same time Southcorp was facing up to a massive write-down of assets including Rosemount.

The Southcorp board - with Bob Oatley as deputy chairman - forced Lambert out last year in a move that increased the Oatley family's disillusionment with a company run by outsiders.

Earlier this year, the Oatleys agreed to sell their 18.8 per cent stake to Foster's, giving the beverages giant a foothold on its wine rival.

On Hamilton Island, Bob Oatley and his boys are back in the kind of control impossible in a public company. On Tuesday morning they were in the foyer of the Reef View Hotel with the architect undertaking the hotel's upgrade, Bob pointing out exactly where he wanted a new swimming pool.

In his book Tales of the South Pacific, American author James Michener coined the phrase ``mesno mania’ - literally meaning island madness.

It's a term that could easily be applied to several of Australia's monied elite. For most of them, the call lures them to the Whitsunday Islands, about 1500km north of Brisbane. It's easy to see why; 76 islands shimmering in the sun, with dazzling white beaches flanked by tropical rainforest on land and the wonders of the Great Barrier Reef below the clear blue water.

Vaughan Bullivant, who made a fortune building up his own brand of vitamins, has spent $70 million on Daydream Island in the Whitsundays since he bought it in 2001. After years of losses, last year he proudly scraped into the black with an anaemic profit of less than $1 million.

Keith Williams was another who arrived in the Whitsundays with a dream, building Hamilton Island up throughout the 1980s with an airport fashioned out of what had been a sand bar.

Just as Bullivant had his own nightmare on Daydream Island, so Williams's dream for Hamilton ended bitterly, with receivers appointed by Citibank in 1992. Williams reached a settlement the following year.

He still won't discuss it.

With this sorry history of indulgence, what makes Bob Oatley think he can do any better than his predecessors?

Oatley - back in his Hamilton Island office overlooking a marina containing the sort of 60-foot racing yachts owned by Oatley himself - has a simple answer. Don't look at others' track record on the islands, where operating costs are twice that of the mainland and hidden dangers lurk (sometimes literally) around every corner. Instead, look at the track record of Bob Oatley.

`That history of other islands didn't worry us - the Oatleys like a challenge,’ he says. 'Don't tell me it's not going to be successful. We're confident.

`It's a real living thing we've got here and it's fantastic. We've got confidence in the island and we've got confidence in ourselves. So you put the two together and away we go.’

For all his confidence, however, Oatley hardly got a bargain at Hamilton Island. After Williams had the receivers called in on him in 1992, the island trust was floated for $115 million by BT Funds Management in 1993, and the island was run as a listed company for the next 10 years.

When it was initially put on the market in 2003 it was valued at $110120 million. What Oatley paid for the island effectively valued it at $138 million, although ominously, he also had to pick up $60 million worth of debt when he bought the island paradise.

Oatley is proud of the work he's put into the gardens on the island, but there are some parts which are conspicuously dated and need attention. For example, the island's well-known `edge pool’, where swimmers can gaze on to the waters offshore, has grime around its edges.

Oatley argues that it is precisely this sort of ailment that can be fixed by a hands-on private owner - such as himself - rather than through the cumbersome corporate structure of a listed company. 'The main difference is that we take an interest in the day-to-day operations -- we come up here about every fortnight so we know what's happening,’ he says.

`The directors of a public company represent the shareholders - but we are the shareholders. This is all part of the fun of doing business.’

Indeed, Oatley seems to want to have a lot m