When Blue Star continued its meteoric rise by acquiring the Whitcoulls Group for $320 million last month, founder Eric Watson achieved, even earlier than he had expected, his aim of the group exceeding $1 billion in turnover.
"This time last year our turnover was just $100 million," he says.
The 37-year-old Christchurch-born entrepreneur has certainly made haste in New Zealand corporate circles. From forming Stationery Brokers and Furniture Brokers in 1989, he acquired Blue Star Office Automation in 1993. The company really came to notice last year when it acquired the customer premises equipment telephone rental business from Telecom.
Market observers were wondering then how Watson was going to continue to expand the group, several commenting that he appeared to be adding companies by leveraging the assets of previous purchases.
But Watson soon found a backer. He sold 51% of Blue Star to US Office Products last December. USOP--a then $US500,000 company--had announced an aggressive international acquisition programme, having at the time of the Blue Star buy-in completed 65 acquisitions. Watson says USOP will turn over more than $US2 billion this year.
In May, U-Bix Business Machines became a wholly owned subdiary of Blue Star; in June Blue Star consolidated its earlier purchase of a substantial shareholding in Wang New Zealand by taking a controlling interest and then standing in the market for all other shares (that deal closes on August 12).
The same month, USOP acquired the remaining shares of Blue Star, with Watson becoming one of the largest shareholders in USOP, and international division president.
The buying continued. Last month USOP bought 100% of Canadian company Brocker Investments, which owns Sealcorp in New Zealand and Australia, and also 100% of Wallace Computer Supplies.
There's more to come.
"There'll probably be some more in New Zealand but nothing significant in the short term," Watson says.
It's not planned to buy more technology companies directly, though Watson says Wang--whose financial year ended on June 30--is developing its own strategy. The implication is that Wang, once the takeover is completed, will be given a free hand to invest as it chooses. That's the freedom Watson has given Sealcorp boss Mike Ridgway.
The Whitcoulls acquisition gave Blue Star a strong foothold in Australia through the Angus and Robertson chain of book stores. "We're looking at two or three other purchases there in the office products area," Watson says.
"I don't see any other specific IT buys at the moment."
A one-time divisional manager for Whitcoulls and more latterly for Xerox in both New Zealand and Australia, Watson says that information technology will contribute around 30% of the group's total revenue this fiscal year. U-Bix--which he says is now trading very profitably--will contribute around $100 million, as will Blue Star Automation, while Wang's contribution is expected to be around $80 million. They will be the major technology earners.
Blue Star recently set up a data division, based on the purchase of part of the Racal operation in New Zealand. "We're developing that whole technology area," Watson says.
He has a firm view that the existing management of the companies purchased should be allowed to continue to focus on what they do. To that end, the parent company has an executive team of just six people. There is a local board and a US board.
"We see the operational managers maximising the businesses," he says.
Despite other acquisition plans, it's time for some consolidation. "There is no way we can continue to grow the way we have over the past five months."