Area served Australia Headquarters Adelaide | Founded September 1875 | |
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The Adelaide Steamship Company was formed by a group of South Australian businessmen in 1875. Their aim was to control the transport of goods between Adelaide and Melbourne and profit from the need for an efficient and comfortable passenger service. For the first 100 years of its life, the main activities of the company were conventional shipping operations on the Australian coast, primary products, consumer cargoes and extensive passenger services.
Contents
- Steamships
- Ships
- Aeroplanes
- Shipbuilding
- Tug boat operations
- The Corporate Raider
- Group structure
- Other companies acquisitions and disposals
- Borrowings
- 1990 1991
- The aftermath
- Industrial Equity Limited
- Court cases
- The Engineers Case
- ASIC vs former Adsteam directors and auditors
- Timeline
- People
- References
In the 1930s and 1940s, the company diversified into the airline operations, towage, shipbuilding, and the shipping of salt, coal and sugar. Adelaide Airways was formed in 1935, and purchased West Australian Airways before merging with Holyman's Airways to form Australian National Airways (ANA) in 1936. ANA was sold to Reg Ansett in 1957. In 1964, the Interstate fleet merged with McIlwraith, McEacharn & Co, and the partnership developed the world's first purpose built container ships. However, in 1973, the company ceased its shipbuilding operations, and in 1977, in its 103rd year of operation, the company sold its shipping related businesses, and ceased its connection with ship owning and operating. The company did, however, retain its interests in tugboat operations.
In the 1970s and 1980s, with John Spalvins at the helm, the company became a corporate raider with a portfolio financed by huge borrowings. The recession of the early 1990s caused lenders, over 200 banks, to demand the return of their assets. This forced the liquidation of the portfolio.
With the completion of the liquidation, on 30 April 1997 the company was renamed Residual Assco Group Limited in order that the Adelaide Steamship name could be reused. Residual Assco was delisted on 24 December 1999. In June 1997, the tug boat operations were floated on the Australian Stock Exchange under the name Adsteam Marine. In 2001, Adsteam Marine acquired its joint venture partner (and major rival as the premier Australian towage operator), Howard Smith. Adsteam Marine became the largest towage operator in Australia and the United Kingdom, with further extensive operations in the South Pacific. In 2006, Adsteam Marine was acquired as the Pacific arm of the world's largest shipping company, AP Moeller-Maersk, thus removing the Adelaide Steamship name from the Australian Stock Exchange and Australian Company registers.
Steamships
The company was formed in September 1875 in Adelaide, South Australia, by a group of pastoralists and businessmen some whom already had steamship interests in the Spencer Gulf, namely Federal Wharf Co. Ltd, Port Adelaide Dredging Company Ltd and Spencer Gulf Shipping Co. Ltd, and was incorporated on 8 October 1875.
Its promoters and founding directors included Andrew Tennant, Robert Barr Smith and Thomas Elder of Elder Smith & Co Ltd. The first ship of the new company was Flinders. In July 1876 the company's leading promoters amalgamated their private ship-owning interests to form the Spencer's Gulf Steamship Co Ltd, trading in South Australian coastal waters. The two companies amalgamated in December 1882. The fleet circled the coast from Derby in northern Western Australia to Cairns in northern Queensland. Shipping operations were supported by a large network of agency offices in almost every major Australian port.
During World War I, several Adelaide Steamship Company ships were requisitioned, as were several other privately owned ships; Grantala and Warilda as hospital ships and Wandilla and Willochra as troopships. Yankalilla and Echunga were also commandeered.
Adelaide Steamship Company was liquidated and reconstructed twice for more efficient and profitable operation, first in 1900 and subsequently in 1920. On 20 January 1915 they took over Coast Steamships Limited, and kept it running as a subsidiary that retained its own identity until 1968.
By the start of World War II, the company owned 30 ships. With World War II, the company was again forced to surrender nine ships to the Navy, including Manoora and Manunda which became an Armed Merchant Cruiser and a hospital ship. Manunda was in Darwin harbour during the Japanese bombing and was able to bring 260 military and civilian casualties to safety in Fremantle. In all during the war she carried about 30,000 sick and wounded back to Australia from the Middle East and New Guinea. During the 1940s, a decline in trade necessitated the company to diversify and they began to acquire interests in other companies and projects. Consequently, after the war, the company diversified into towage, shipbuilding, and the shipping of salt, coal and sugar.
On 1 January 1964, its interstate fleet was merged with that of McIlwraith McEacharn in a new company, Associated Steamships Limited, in which Adelaide Steamship Company held 40%. Also in 1964, the merged company developed the world's first purpose built container ship, MV Kooringa. Bulkships Limited, in which Adelaide Steamship held a 40% interest in 1965, acquired all the shares in Associated Steamship Limited in 1968. In 1977 the company's interest in Bulkships was disposed of and Adelaide Steamship Company ceased its connection with ship owning and operating. The company did, however, retain its interests in Tug boats and Tug boat operations and by the late 1980s, Adelaide Steamship was one of Australia's oldest surviving industrial companies.
Ships
Ships owned and operated by Adelaide Steamship Company included:
Aeroplanes
Adelaide Airways was formed as a subsidiary of the Adelaide Steamship Company on 3 July 1935 and commenced operations on 29 October. It had a number of different types of aircraft in its fleet, including the Short Scion, the General Aircraft Monospar ST-25, and the De Havilland DH.89A.
On 12 June 1936, Adelaide Airways purchased West Australian Airways for £25,000. Ivan Holyman (of Holyman's Airways Pty Ltd) approached AdSteam with a view to an amalgamation, aiming to form Australia's most powerful airline which would effectively control airline traffic between Perth, Adelaide, Melbourne and Sydney. On 12 June 1936 the two companies merged and, on 2 November 1936 with Orient Steam Navigation Company and Union Steam Ship Company of New Zealand, formed Australian National Airways (ANA), "the pre- and post-war giant among Australian domestic airlines". AdSteam retained partial ownership in ANA until Holyman's death in 1957. The ANA board then unsuccessfully attempted to sell out to the Government owned Trans Australia Airlines, before reaching agreement with Reg Ansett to sell the airline to him for £3.3 million. ANA and Ansett Airways merged to form Ansett-ANA on 3 October 1957.
Shipbuilding
Adelaide Ship Construction was set up as a subsidiary of the Adelaide Steamship Company in 1957, and was incorporated in July 1957. At the same time it was issued with the sole Australian licence for the hydroconic hull design patented by Burness, Corlett & Partners of the United Kingdom. This hull design for tugs gave them greater bollard pull from a given horsepower. Adelaide Ship Construction had been set up especially to address the issue of Australia's ageing fleet of tugs. The yard was built on the historic Fletcher's slip site at Birkenhead.
The keel for the first tug was laid 20 May 1958 and it was launched 12 February 1959. The shipyard site grew from two acres and one berth to four berths and 6½ acres in 1968, and to cater for vessels up to 425 feet long. At this time it employed more than 1,000 men. Adelaide Ship Construction had also acquired from Burness, Corlett and Partners the licence for their 'Towmaster' patent. Coupled with the Hydroconic hull design this enabled ever greater pull in its tugs. Hamersley Comet, built in 1968 had a bollard pull of 34.1 tons, the strongest to that time.
However, by 1973 the yard was running at a loss of $3.4 million, and it closed in August of that year. Its last ship was Cape York.
Tug boat operations
A relatively minor sideline, started in the 1890s, was the company's tug boat operations. Gradually, tug boat operations extended over a number of ports, but until the middle of the 20th century they remained the poor relation of the more significant coastal shipping operations. With the decline of coastal shipping however, towage assumed more importance. By the 1960s, towage and associated operations represented a very significant part of the company's activities.
In 1977 the company's interest in Bulkships Limited was disposed of, and Adelaide Steamship Company ceased its connection with ship owning and operating. It had diversified into investment and property ownership, vineyard and wine production, optical goods manufacturing and distribution, engineering, share investment, and, until 1973, shipbuilding. Thus towage and associated operations continued to have prominence, even during the 1970s and 1980s when the Adelaide Steamship Company became the foundation for one the country's major conglomerate organisations.
As this activity was happening, towage began to reassert itself as an important element of the company; From 1993 it exhibited a period of aggressive growth until the company had a fleet of 156 tug boats, and operated in over 40 Australian, Indian, Pacific Oceana and British ports. Strengthened by a series of industry rationalisations - Brambles' Port Kembla, Sydney and Newcastle operations and P&O's towage operations in Western Australia - the towage division became a valuable candidate for asset disposal. In April 1997 the company changed its name to Residual Assco Group Limited and in June 1997 floated its marine division which was registered on the Australian Stock Exchange as Adsteam Marine Limited.
Once it became a publicly listed company in its own right, Adsteam Marine established a strong investor following. In addition to towage, the company developed shipping agency and tug barging activities. Adsteam Marine doubled its size in May 2001 when it acquired the towage interests of Howard Smith, its partner in many towage ventures, for more than $500 million, making it the largest towage operator in Australia and the United Kingdom, together with operations in Papua New Guinea and Fiji. Other activities included barge operations in the United States, and ships agency services throughout Australia, New Zealand and India.
In 2006, it was acquired by AP Moeller-Maersk.
The Corporate Raider
After becoming chief executive of the Adelaide Steamship Company in 1977, John Spalvins built up one of Australia's largest industrial conglomerates and became one of the most feared takeover specialists in corporate Australia. Spalvins transformed himself into an entrepreneur, using vast amounts of debt to launch a series of massive takeovers. Adsteam "aggressively acquired significant shareholdings in a variety of companies in a number of fields including retailing, hotels, leisure industries and civil engineering." "Adsteam's share price rose dramatically through much of the 1980s and it was hailed by some commentators as being entrepreneurial, well managed and with a highly disciplined reporting system."
At its height, the Adsteam group included Woolworths, David Jones, brewer Tooth & Co, the Petersville Sleigh food group, the Farmers Union dairy group, Metro Meat, a stable of premium wineries and many others. Also, at various stages, it held a 15% stake in Westpac, a 20% stake in Bell Resources, and numerous other "strategic" stakes and investments. During this period of aggressive growth, AdSteam also had 156 tug boats and operated in over 40 Australian, Indian, Pacific Ocean and British ports. The company was Australia's fourth highest capitalised company during the 1980s.
Group structure
A characteristic of the AdSteam Group during this period was a complex Group Structure of cross ownership where many of the companies of the group owned not-quite-50% of each other. This served the dual purposes of making the elements of the group "take-over proof", but did not trigger the financial reporting requirements of a consolidated set of accounts. In the 1990 Adelaide Steamship Company Annual Report, the following companies were reported as "Principal operating subsidiaries" of the AdSteam Group, with the following cross ownerships greater than 5%:
Other companies, acquisitions and disposals
Other companies, acquisitions and disposals in the group included:
During the 1980s, AdSteam instigated a number of "Share plays", and also made significant investments in a number of companies including:
Borrowings
All of this was financed by huge borrowings from about 200 banks. For example, the lendings of just one bank, the State Bank of South Australia, are summarised in the following chart.
The source of the above data, (South Australian Governmentt Auditor in 1993), in a comment dated 26 April 1990, states: "Papers also comment on "off the record" discussions with Adsteam Group's major bankers and gives exposures of nine banks (including the Bank) which total $4,960M. There is little comment on this figure but an analysis of each company's results shows assets exceed liabilities in each company by a good margin." A second comment states: 'Paper also comments on recent press issues including potential worst case losses of $110.0M from Bell Resources investment - "the impact of such a loss ..... is not considered a major concern" '
A subsequent comment dated 26 July 1990 states: 'Lending Credit Committee minute notes planned reduction in exposure through maturity of facilities. Also notes extension of other facilities to August 1991 which illustrates "the continued level of confidence this Bank held in Adsteam's continuity". With the benefit of hindsight, further comments make interesting reading. It is also interesting to note that despite the assurances recorded in the board papers, from that point in time the State Bank of South Australia steadily reduced its exposure to the AdSteam Group.
1990-1991
The opaque nature of the AdSteam Group caused rising concern in a variety of circles. Although shareholders continued to enjoy bonus shares, rights issues, and significant dividends, the share price plateaued. Financial journalists started asking questions, and the share price faltered. After the 1990 Annual General Meeting and the announcement of the 25c dividend (per share) against a diminished share price, investor confidence deserted the company and the share price crashed from over $5 to under $1 in one day.
The previously "nervous" banks were far from happy, and started demanding the return of their capital. Of course, AdSteam had this money invested, and did not have billions of dollars of liquid assets. Also of course, the banks were not keen to force AdSteam into bankruptcy as such a situation would be unlikely to achieve the return of their assets. Hence, AdSteam organised an "arrangement" with the 200 banks, and in 1991 the Adsteam group was placed under an informal, receivership-type scheme of arrangement. Under this arrangement, there was an orderly disposal of assets.
The aftermath
In order to facilitate the orderly disposal of assets, a number of the group members were renamed:
During the course of the disposal, there were a number of sales, and four successful floats:
Nevertheless, not all of the disposals were made under ideal circumstances, and Adsteam's loss of $4.49 billion represented one of Australia's largest corporate collapses.
However, the major lesson out of the AdSteam collapse was for the accounting profession; a newspaper report on its failure carried the sub-headline "Adsteam a humiliation for the accounting profession". "Adsteam was "an excellent instance of how the rule-book approach to consolidation accounting imposed by the law and the Accounting Standards at the time determined managerial actions" ".
The "Adsteam saga" resulted in major changes to Australian accounting rules pertaining to consolidation and led to the issue of AAS 24 Consolidated Financial Statements by the accounting profession in June 1990 for application from 30 June 1991 (subject to a "legal impediment", see Deegan, 2005, p. 880) and the issue of AASB 1024 Consolidated Accounts with statutory backing in 1991
Specifically, the definition of "control" for consolidation purposes was broadened beyond prescribed ownership interests to embrace control over an entity's financial and operating policies, making use of the notion of "substance over form" in determining the existence of a controlled entity.
The "AdSteam saga" also provided some lessons for banks and auditors. For example, the South Australian Government Auditor produced a number of Case Studies - Volume 6 is titled "The Management of Credit: Case Studies", and Chapter 9 is titled "Case Study in Credit Management: The AdSteam Group". The opening sentence states: "The exposure to the Adelaide Steamship Company Limited Group of Companies was complex.", and if your interests lie in those directions, makes fascinating reading.
Industrial Equity Limited
Several matters from the collapse are still ongoing - over 15 years after "the collapse". Industrial Equity Limited (IEL) is worthy of particular mention:
Court cases
The Adelaide Steamship Company was involved in two court cases which led to changes in the way the Australian Constitution and Australian Law is interpreted.
The Engineers' Case
"Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129" (commonly known as the Engineers' Case) was a landmark Australian court case decided in the High Court of Australia on 31 August 1920. From a legal perspective, this case is widely regarded as one of the most important cases ever decided by the High Court of Australia, for it swept away the earlier doctrines of implied intergovernmental immunities and reserved State powers, firmly establishing the modern basis for the legal understanding of federalism in Australia and Australian constitutional law. In essence, this meant that decisions of the Commonwealth Conciliation and Arbitration Court were binding on State governments. and that the constitution is no longer read in a way which attempts to preserve the power of the states.
When providing his judgement on Strickland v Rocla Concrete Pipes Ltd, (where the Court unanimously rejected the decision in Huddart, Parker & Co Pty Ltd v Moorehead, holding that it was based on the rejected doctrine of reserved State powers, which was abolished in Amalgamated Society of Engineers v Adelaide Steamship Co. Ltd.), Justice Barwick stated "the earlier doctrine virtually reversed the Constitution".
ASIC vs former Adsteam directors and auditors
"Residual Assco and Australian Securities and Investments Commission (ASIC) vs former Adsteam directors and auditors.
Timeline
People
Throughout its history, many people have been involved with, played significant roles in and/or been associated with the company: