|
The Daily Telegraph
Friday, 29 March 1985
Harrods: a personal view by R.W. (Tiny) Rowland
IN a supernatural spectacle, Britain's largest chain of department stores, House of Fraser, which owns Harrods, has slid, without inquiry, into private hands, through a deployment of personal wealth on a scale never seen in the City of London before. Assisted by the comely Kleinwort Benson, Mohamed Al-Fayed has pulled off a trick that baffled the audience. How was it done?
According to Norman Tebbit, Secretary of State, whom I saw while the Al-Fayeds were buying freely on the Stock Exchange, the only consideration now is competition. That is the reason why a hitherto unknown buyer, some of whose assets are held through tax havens, has quickly succeeded where British public companies, including mine, have repeatedly failed. The Department of Trade is now satisfied with the assurances of a Liechtenstein off-the-shelf company. The Minister sees nothing wrong with that.
By the magic of money, all the worries of the Government Department have now disappeared. Government pressure to keep House of Fraser operationally based in Glasgow, their regional concerns of the many Members of Parliament, whom the Board of House of Fraser used to approach, the union representations for the 30,000 employees, the special concern to preserve the status of Harrods -- all have vanished.
I waited for the formal offer document with curiosity. I wanted to learn more about this marvellous fortune. Kleinwort Benson have rubbed the magic lamp, but the Djinn is still very unclear in outline. Through the smoke, "interests in banking, shipping, oil, property, and luxury hotels" waver about in a small paragraph on page 6.
But I question whether the combined assets of the Fayed family, as presented by Kleinwort Benson, could have generated the capital employed in this offer. Can the hereditary wealth of the family be so great? I can find no evidence. And I must confess that as recently as last July, I thought that Mohammed Al-Fayed was not in a financial position to make this offer or anything near to it.
"The family's major property interests," I read; are in Park Lane in London, in the Rockefeller Center in New York; in the Champs Elysees in
Paris, in Switzerland and an estate in Scotland. The Al-Fayed family has owned the Ritz Hotel in Paris since 1979."
The one easily identifiable and often quoted interest here is the Ritz Hotel. Lazards, acting for Mr Al-Fayed in January 1979, bought the Ritz for £9 million-£10 million (92 million French francs).
The modernisation of the hotel is said to have cost a very large sum -- but in August last year the hotel was fully mortgaged, right down to the furniture, to the Royal Bank of Scotland, for just £9 million. The Ritz Hotel, since acquisition, has lost money and, in the year to December 1983, lost £2.5 million.
What about those tremendous properties, "Park Lane, the Rockefeller Center, and the Champs Elysees"? In Park Lane they own, not the street, but the apartment block in which they live, which pays a gross rental of £350,000 a year to the Liechtenstein company, Bocardo S.A. The same company owns the estate in Scotland, and paid £464,225 for it, in 1975.
All the assets are a cut from the same magical cloth, and it seems odd to me that any rich man would want or need to put his chalet in Gstaad and flat in Paris into a list of his business assets. "The Rockefeller Center" looks impressive -- but turns out to be a sub-lease of a section of one of the buildings. The shipping interests of the Al-Fayeds are difficult to trace, and the allusion to them may be deliberately vague. It is known that the Al-Fayeds own two or three ferries operating from Alexandria, of which one is stranded on a mud bank in Piraeus. If there were any regularly operated and substantial ships, surely Kleinwort Benson would have been glad to name them, one by one.
Similarly among the "significant" banking interests, the most impressive I can identify is a 5 per cent holding in a minor bank in San Antonio, U.S.A.
So what does it mean, and what does it matter? Clearly it means that the mysterious Al-Fayeds have become impressively rich, and that these funds, wherever they came from, are to be used to buy up a nation-wide business in Britain. The Minister sees nothing wrong with that.
The Board of House of Fraser has been, until now, extremely sensitive about the beneficial ownership of even small parcels of nominee shares. Kleinwort Benson for their part complained about Robert Maxwell's family trusts in Liechtenstein just weeks ago, when he wanted control of Waddingtons. Board and bank now unite in recommending this offer by the Al-Fayeds. They say it represents a very fair price for the shares, being 20 per cent above the market value. But then every offer the Board has received, including ours in 1981, was, in its day, at least 20 per cent above market value.
How has the board satisfied itself on this offer, other than personally?
I cannot recall seeing before the simultaneous announcement of a share offer and a 100 per cent rise for the Chairman of the target company, plus a £30,000 bonus. All the rest of the board take a 30 per cent rise. Not one of them has resigned, although this deal is quite clearly contrary to arguments they previously put to the Office of Fair Trading and the Department of Trade. The Minister sees nothing wrong with that.
Perhaps the Minister has some greater national benefit in mind, which justifies the deliberate exclusion and repeated trials of British bidders. President Mubarak of Egypt has just been here on an official visit, and some journalists have drawn inferences from that, and from Mohammed Al-Fayed's invitation to the dinner at No.10 Downing Street, where, I believe, the two met for the first time.
But never mind, there is plenty of money in Switzerland for the offer, for Kleinwort Benson tells us so, and the Minister sees nothing wrong with that.
What I see wrong with the Minister is that our company repeatedly sought the right to bid on an equal basis in these last few weeks. Our clearance was not allowed until the Department was assured that Mohammed Al-Fayed had acquired over 51 per cent. A riderless horse is the winner.
So I repeat the question: do we really know who now owns the House of Fraser and with it Harrods, its most famous asset?
Mr Rowland is chief executive of Lonrho and chairman of The Observer.
|
|
