The business world is filled with rags to riches stories, but Australia has few like the tale of Swisse Wellness.
The health and wellness brand was the brainchild of an organic baker Kevin Ring, who first sold his hand-made vitamins pills from a shop in St Kilda in 1972, before moving to the little shop in the unfashionable Melbourne suburb of Airport West.
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From those humble beginnings, Swisse was taken over by Hong Kong-listed giant Biostime in 2015, a deal that valued the company at an astonishing $1.67 billion. What isn’t known is that, just nine months before that deal went ahead, the shareholders of Swisse very nearly accepted an offer of just $30 million.
Radek Sali remembers the day he finalised the sale to Biostime, after 10 years as the company’s chief executive. After all, it’s not often you ink a contract that values your company at almost $1.7 billion. Sali’s personal 15 per cent shareholding was now worth $250 million.
“I was absolutely spent,” Sali says.
“It had been such a build up of so many years of focus. I went home and [wife] Helen said ‘what do you want to do to celebrate?’. I asked for a nice bowl of chicken soup.”
It might be the first billon-dollar deal to be celebrated with chicken soup. Given that the Swisse motto is “celebrate life every day” – staff use that message to sign off their voicemail and emails – the deal should have sparked the party to end all parties.
“Helen and I did open a nice bottle of red, but that was about it,” Sali says. “Chicken soup was my only request.”
Radek Sali, former boss of Swisse Vitamins who now runs his own investment company. Photo: Eddie Jim
There was, however, a good reason for the muted celebrations. It was, Sali admits, a sense of relief.
“There was a point where I had $15 million of personal debt,” Sali says. “Just nine months before we sold, we were offered $30 million for the entire business, and some of our shareholders were quite tempted to take that offer. It’s a simple equation. Fifteen per cent of $30 million is $4.5 million, and I had $15 million of debt. If that had happened, I would be bankrupt. Instead, we completed the turnaround and the sale. Life can be remarkable sometimes.”
Swisse CEO Radek Sali (left), singer Delta Goodrem, who promotes Swisse, and Swisse partner Michael Saba.
Knowing how well Swisse’s sales were doing in China, Sali convinced his partners and shareholders to push on. The next nine months justified that decision.
Hong Kong-listed company Biostime International Holdings had won an auction to buy Swisse, beating out two Chinese companies, Hony Capital and manufacturer Shanghai Pharma.
While we won’t always agree, we hear each other out,
Radek Sali on working with business partner Adam Gregory
Overnight, the deal lifted the fortunes of Sali, Kevin Ring’s son, Stephen, and business partner Michael Saba. The trio immediately became some of Melbourne’s richest men, with estimated individual windfalls in excess of $250 million from the Biostime deal. Sali’s net worth alone is now estimated at $400 million.
Sali, better known as “Rad” to his mates, admits they were heady times.
Sali has invested in the business of celebrity chef George Calombaris Photo: Supplied
Just a couple of weeks after the deal, Sali’s beloved Hawthorn Football Club ran out on to the MCG and won a third consecutive AFL premiership. “Now that was a celebration,” he laughs.
But few know just how close Sali had come to losing everything. And it wasn’t the first time Swisse had nearly gone under.
Radek Sali with Nicole Kidman at a Swisse event in Shanghai in 2016, Photo: Hu Chengwei
“We were close to the sun probably three times over and I probably should have lost my job three times over,” Sali says. “But we managed to get through it each time and we were better for it. I think you learn the most from failure. We had a culture that was big enough and accepting enough to look inward and examine what we were doing, but we never lost our edge. We never lost our entrepreneurship, which was a strength.”
So just how close did Swisse come to closing?
“We were definitely in a position where we were talking about breaking covenants and, if we didn’t have good relationships with the banks, and if we weren’t thinking about those things and preparing ahead of time, we could have easily been in a situation where we went the other way and lost it all,” he says. “But the other way to look at it, if you don’t test those lines, then you will never understand how far you can take a business.”
Radek Sali arrived at Swisse having spent a decade at Village Roadshow.
“A great company but the cinema industry was challenged at the time,” Sali says. “I wanted to do something myself.”
The opportunity to do something else was Swisse. When Sali arrived in 2005, the company had 30 staff at its head office in Smith Street, Collingwood, and was turning over $14 million year.
When he walked out the door a decade later, Swisse’s turnover was $650 million, with a profit of $230 million. The company’s new Collingwood head office had 300 staff, along with offices in Sydney, London, Hong Kong and China. What happened in the intervening decade was the China boom, and almost insatiable demand for top-end Australian health and dairy products.
“It was a fun journey,” Sali says. “When we arrived the category was growing at 1 per cent. When we left it was growing at 30 per cent. That’s the category, not just our brand, so I can’t take all the credit.
“I am very proud of our team’s achievement and very thankful for having supportive shareholders who believed a vision that was a lot bigger than any of us ever dreamed up, except for me and two business partners. But I am very happy that the Swisse chapter has closed and I am out of the throngs of being a CEO seven days a week and at the beck and call of a business.
“Thankfully, all the way through and even in those difficult times for the company, we had a growing top line, it was just the bottom lie that was difficult sometimes. We managed, over time, to get that right too. I am very proud that we doubled profits in the year that we sold the majority of our business and then exited. It shows we left more in the tank for the new owner.”
As part of his deal with Biostime, Sali agreed to stay on as chief executive for 12 months.
“I was happy and we executed everything to the best of our ability, But at the same time, I knew there was life ahead after Swisse.”
Part of that life was to include Adam Gregory, the Goldman Sachs investment banker who had worked on the Swisse sale.
“We really admired each other’s work and had a great level of trust and empathy for each other through the process,” Sali says. The pair agreed to start an investment firm, based in Melbourne, called Light Warrior, and look for prospective businesses to invest in.
“While we won’t always agree, we hear each other out,” Sali says.”Adam and I got talking about life after this deal and it became clear that Adam should be the right person to become CEO of our investment firm.”
In the past year, Gregory and Light Warrior have reviewed more than 100 business proposals. Of those, the pair have invested in just four, ranging from phone advertising technology to a pre-school deal.
But it’s one investment that has made the majority of the headlines. Light Warrior took a 33 per cent stake in Made Establishment late last year, the restaurant group owned by celebrity chef George Calombaris.
Sali and Gregory knew there may be a few “potholes” in the books, to use their words, but after they conducted a review it was much worse. It emerged that Made Establishment had underpaid staff $2.6 million in wages before Light Warrior’s investment.
Calombaris was forced to make a public apology, and Sali’s team went about the business of making sure every employee, including former staff, was reimbursed.
Sali admits it was a challenging time.
“The whole ethos around the investment fund is around creating value, and that means creating value for everyone, and that’s not just the shareholders, that includes staff,” says Sali.
“Everyone needs to be respected and, for us, the most important thing was to look after those who are out there who were affected as soon as we were aware of it. I feel we did everything that we could to make it right, in a situation that was definitely very challenging.”
He says every single staff member has now been repaid. Many, who received more than they were due, have been allowed to keep their higher wage.
“I reckon we did the right thing by everyone,” Sali says. “I’m proud of that.”