Outgoing Wesfarmers chair Michael Chaney on the deal that eluded him and the conglomerate’s success

Michael Chaney doesn’t hesitate when asked to name a deal that got away during his tenure as chair of the conglomerate where he made his name.

“Lynas,” the urbane 76-year-old replies as he prepares to retire from business after a half century atop corporate Australia.

Wesfarmers saw the opportunity in rare earths long before critical minerals became a buzz phrase, trying to entice Lynas into a $1.5 billion takeover with a $2.25-a-share cash offer in 2019.

“They shunned us, rightly so with hindsight,” Mr Chaney says with a smile.

Lynas has since traded as high as nearly $22 and finished Wednesday with a market value of $12.6b.

“That would have been a really good acquisition. We could have paid more for it, but we didn’t.”

There have been plenty of other near transactions during Mr Chaney’s tenure as chair, all floated by Wesfarmers’ busy business development team, that didn’t win board approval. There, he has no regrets.

“There are quite a few deals no-one knows about that I’m glad we didn’t do, some quite big ones,” he says, adding that ultimately the board’s reservations about the targets were proven correct.

WA’s most prominent company director will step down after 11 years as chair at Wesfarmers’ annual meeting on Thursday, to be replaced by former Amcor boss and the most recent past chair of BHP, Ken MacKenzie.

His final directorship, the chair of Northern Star Resources, will be surrendered next month.

The retirements will bring the curtain down on a business career that saw Mr Chaney lead Wesfarmers for 13 years and included stints as chair of National Australia Bank and Woodside Energy, and a directorship with BHP.

“I can’t imagine having a better corporate career than I’ve had, surrounded by great people, clever people with a common purpose around shareholder welfare, and not everyone has that,” he says.

Having joined Wesfarmers in 1983, the University of WA science graduate could be the last employee who straddles both the its foundation as a farmers’ co-operative and the public company, which listed on the ASX in late-1984.

He’s been a key figure in driving the modern-day group’s mission of generating long-term shareholder returns through disciplined capital allocation and strong management of its sometimes disparate businesses, which now include a lithium mine and pharmacies alongside the big retail brands Bunnings, Kmart, Target and Officeworks.

“It’s no surprise to me that if your corporate objective is to return to shareholders, you’re likely to get a better return than if your corporate objective is empire building,” Mr Chaney says.

The $85b Wesfarmers can seem like a different beast. It doesn’t do hostile takeovers, it doesn’t buy businesses just to get bigger, it backs in management, it doesn’t overspend and it picks its chief executives from within, always.

Mr Chaney doesn’t see that changing anytime soon, pointing to a now ingrained culture and the group’s seamless chief executive successions and textbook handovers over the past 40 years.

“From Trevor (Eastwood) to me, to Richard (Goyder), to Rob (Scott), the same culture has been preserved with that shareholder and stakeholder focus,” he says.

“It’s so ingrained I can’t imagine the board appointing a CEO who is not aligned.

“If Rob fell under a bus today there are a few people we have already identified who could take over.

“By the time he retires those people will still be here, and there may be others who have risen to that level, but I don’t have any doubt when he does go, the next appointment will be internal.”

Mr Chaney’s tenure as chair wasn’t without its sticky moments. He took up his appointment just as Wesfarmers was readying the ultimately disastrous expansion of Bunnings into Britain.

By the time, Wesfarmers pulled the plug two years later, it had burnt through $1.5 billion of shareholder funds.

“We broke a golden rule we thought we would always stick by — beware of hubris,” Mr Chaney says.

Management and directors reckoned Bunnings was better than rival British retailers. “They weren’t . . . the numbers didn’t add up.”

“Was it a bad idea to go in there? Obviously with hindsight it was. Does that mean you shouldn’t take risks? No.”

His high points? Wesfarmers’ early decision during COVID-19 to fully pay its 100,000 employees during the pandemic without drawing on government handouts.

“That meant our profits fell dramatically, but it illustrated an important point — that while we have this shareholders return focus, we’d only achieve it by looking after all of our stakeholders, in that case the employees.”

The 2018 decision to spin off Coles, Wesfarmers’ biggest business, has also proven a good call.

“There was an overly large investor focus on Coles in the market, and an under-focus on really strong businesses like Bunnings with higher growth potential,” Mr Chaney says. Since the split, Coles’ share price has doubled, while Wesfarmers’ has tripled.

“It’s a hard thing to do, lose 40 per cent of your business and market cap, because people tend to think big is better.

“But there was none of that sort of thinking, and it was a real achievement for the company in the past 10 years.”