Bloomberg News

Rinehart’s Children May Have $4.7 Billion Stake in Trust

March 12, 2012

Asia’s Richest Woman Gina Rinehart. Photographer: Ron D'Raine/Bloomberg

Asia’s Richest Woman Gina Rinehart. Photographer: Ron D'Raine/Bloomberg

The four children of Gina Rinehart, Asia’s richest woman, may have a stake of as much as $4.7 billion in a trust at the center of a dispute where the three eldest are suing to oust their mother as trustee.

Jay Newby, chief financial officer of Hancock Prospecting Pty, calculated the value of each child’s share of the trust at A$600 million ($632 million) in a Sept. 4 e-mail, based on an estimate of her wealth of A$10.3 billion. Rinehart’s current net worth of $20.2 billion, according to the Bloomberg Billionaires Index, would put each child’s stake at about $1.18 billion based on Newby’s calculations.

“Given the developments on hand in the group, this is a modest figure,” Newby said, referring to the A$10.3 billion estimate. The e-mail was among more than 800 pages of documents released by the New South Wales Supreme Court yesterday in the family litigation after Rinehart lost a final bid to block their release at Australia’s top court. Hancock Prospecting holds the majority of Rinehart’s fortune including stakes in some of Australia’s biggest coal and iron ore mines.

Hope Rinehart Welker, Bianca Rinehart and John Hancock sued their 58-year-old mother in Australian state court in September seeking to have her removed as trustee, accusing her of misconduct by threatening their financial ruin, giving them a single day to sign an accord extending her control of the trust and lying to them in a bid to sign the agreement.

Bankruptcy Threats

“Suggestions that Mrs. Rinehart threatened any of John Hancock, Hope Rinehart Welker or Bianca Rinehart with bankruptcy are incorrect and offensive,” her lawyer, Paul McCann, said in a March 10 e-mailed statement.

Newby said in the Sept. 4 e-mail to Bianca, that based on the A$600 million estimate of her stake, she would have to pay about A$142 million in capital gains taxes.

“It is important to note that whatever value we might ascribe is irrelevant -- the tax office would obviously be keen to ascribe a far higher value in order to collect more” capital gains taxes, Newby said at the time.

Newby couldn’t be reached by phone, a receptionist at Perth-based Hancock Prospecting said yesterday, and the company didn’t immediately respond to an e-mailed request for comment on the valuation of the trust. McCann declined to comment on the estimated valuation of the stake in an e-mailed reply to Bloomberg News. Andrew Bell, a lawyer for the eldest children, didn’t respond to a request for comment left at his office.

Inheritance

Rinehart inherited iron ore mining assets from her father and has an agreement with Rio Tinto Group under which she collects royalties on properties in Western Australia mined by Rio. She agreed in August to sell coal projects in Queensland to GVK Power & Infrastructure Ltd. (GVKP) for $2.2 billion.

Her wealth has more than doubled in the past year, as soaring demand for coal and iron ore from China has made her mining assets more valuable.

She had attempted to persuade the children to sign the new agreement keeping her in control of the holdings and extending the trust’s expiration to the latest allowed under law in 2068, according to the documents. She had said they would face bankruptcy with the pending tax bills if they allowed the trust to be dissolved on Sept. 6, the 25th birthday of youngest child Ginia, who has sided with her mother in the dispute, as the trust’s rules had required.

Reconsider Lifestyles

“Bankruptcy is not in the financial interests of the beneficiaries,” Rinehart wrote in an e-mail urging the children to accept the new agreement. “It may however be reasonably arguable that personal development-wise it would be in the best interests of the beneficiaries to force them to go to work and reconsider their holidaying lifestyles and attitudes.”

Under Hancock Prospecting’s, or HPPL’s, constitution, only a person who is a Hancock family group member is entitled to hold and control a share in the company.

“These provisions in the constitution are unable to be changed,” Rinehart wrote in a Sept. 3 e-mail to Bianca. “It is hence not possible for me or any beneficiary to either sell HPPL shares to a third party or raise funds by way of borrowings using HPPL shares as security.”

The three children suing accused her of “falsely representing by implication to Hope Rinehart Welker that she had not varied the trust - and that Hope Rinehart Welker would face the financial consequences” as far as bankruptcy even though Rinehart unilaterally extended the vesting date before notifying them.

For the Grandchildren

The Hope Margaret Hancock Trust was created by Rinehart’s father Lang Hancock for the benefit of his grandchildren. The trust holds 23.45 percent of the voting shares of Hancock Prospecting and receives dividends from the company, some of which are distributed to the children.

The company, with iron ore and coal projects in Australia, has 6,000 voting shares with Rinehart holding 4,593 and the trust 1,407, according to a statement of defense filed by Rinehart’s lawyers.

Rinehart has full and ongoing control and management of the company and would lose it if a new trustee were appointed, the lawyers said.

She wouldn’t have the “ability to pass circular resolutions without the involvement of other persons,” according to the documents.

‘Lacking Ability’

The three children suing sought to have at least one of them appointed as the trustee to replace Rinehart, a suggestion rejected by their mother who said none of the children had the required trust, independence or ability for the job.

None of the children “has ever held any paid position in the resources industry, other than as arranged or paid for” by Rinehart, according to the statement of defense.

Among those attempting to convince Hope Rinehart Welker to drop the lawsuit was Senator Barnaby Joyce, according to the released documents.

“You are a family Australia needs,” Joyce wrote in a Sept. 11 e-mail. “All good families have their problems but before it gets really out of hand, I would try to get it back in house and out of public view.”

Alby Schultz, member of parliament for Hume, also wrote to Hope, calling the lawsuit a “horrific step.”

The case is Hope Rinehart Welker v Gina Rinehart. 2011/285907. New South Wales Supreme Court (Sydney).

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editor responsible for this story: Douglas Wong at dwong19@bloomberg.net


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