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The Observer
Sunday, 31 July 1988
Publish and be damned
MELVYN MARCKUS
CITY EDITOR
THE House of Fraser affair, which I have chronicled for the last six years, has taught me, if nothing else, how unwise it is to attempt to predict the actions of those who, however briefly, hold the mantle of Secretary of State for Trade & Industry.
Was it predictable that Norman Tebbit, in the spring of 1985, would wave through Mohamed Fayed's £615 million takeover bid for House of Fraser in the space of just 10 days?
Was it predictable that, come the autumn, Tebbit's successor, Leon Brittan, would attempt to sweep the House of Fraser controversy under the DTI carpet and insist, despite a persistent campaign by The Observer, that he saw 'no grounds whatever' for a Companies Act investigation?
Brittan's next challenge, the Westland affair, proved his undoing (he was forced to resign from the cabinet). But the reward for his unique lack of perspicacity recently arrived by way of his appointment as European Commissioner in succession to Lord Cockfield.
Was it predictable that in April last year, Paul Channon, with an eye to the General Election in June, would eventually launch a full-scale DTI inquiry into 'the circumstances surrounding the House of Fraser acquisition' -- a decision which begged the question: why did the Government not act earlier? Channon can hardly be criticised for the procrastination of his predecessors, but the DTI inspectors' perception of the role played by Tebbit in the Fayed/House of Fraser affair should make interesting reading.
The DTI report, compiled by Henry Brooke QC and the accountant Hugh Aldous, is understood to have been delivered to Lord Young a week ago yesterday. Unpredictable as Trade Secretaries are, the belief is that Young intends to release the report within the next two weeks. Both houses of Parliament rose of Friday for the summer recess and Young is clearly intent on publishing the inspectors' findings during the near 12-week bucket and spade break which runs to 19 October.
The hint, in Thursday's edition of The Independent last week, was that Young may choose to publish an 'edited' version of the inspectors' tome. Surely Lonrho's chief executive, Tiny Rowland, and Mohamed Fayed, the make-believe Pharaoh, both deserve the real thing: namely an unexpurgated report which details whether or not the Fayeds misled the Government when they acquired the Harrods store combine and whether or not they did so with their own liquid resources.
The Observer has, for more than three years, alleged that Mohamed Fayed's claims of vast inherited wealth are a myth -- allegations that have resulted in a shower of writs, all of which The Observer is defending. Whatever the inspectors' findings, I, for one, would like to read them in full. Nor, I suspect, am I alone among taxpayers in such thinking. To coin an old Fleet Street slogan: Publish and be damned.
As countdown to publication of the DTI report got under way, Channel 4 -- finally freed from injunctions -- duly screened 'The Harrods Sale'. Nothing to celebrate for Mohamed Fayed, or his merchant bank advisers Kleinwort Benson.
In the words of presenter John Plender: 'This has been first and foremost a story of deception. Mohamed Fayed and his brothers duped the British Press and public about their family background and the origins and scale of their wealth.
'By public misrepresentation, they succeeded three years ago in taking over one of this country's leading store chains… Kleinwort Benson no doubt observed the normal banking conventions in its dealings with the Fayeds, but this scarcely seems adequate in the highly unusual circumstances of the Fayeds' bid for the House of Fraser. Had they asked a few more questions in the right places they would not so readily have put their good name on the line.'
Much of what appeared in 'The Harrods Sale' has already been reported in The Observer but Plender's rendering of why the Fayed trio went to such elaborate lengths to conceal its borrowings is, I think, worthy of repeat.
As Plender put it: 'Under the law the Government had powers to refer such a bid to the MMC [Monopolies & Mergers Commission] on public interest grounds. And there was in fact just such a case a few months after the House of Fraser takeover. Elders, an Australian group, had raised a huge bank loan and was proposing to take over the giant food and drinks conglomerate Allied Lyons. Precisely because of worries about the scale of borrowing, the Government demanded an official inquiry.
'It was in this climate that the Fayeds were making their offer for House of Fraser. In many ways their bid was more vulnerable to a monopolies reference to that of Elders; they were much smaller in relation to the company they were trying to acquire, they had never mounted a big takeover before and they had absolutely no track record in running the kind of business they wanted to buy.
'If they had revealed the relatively small size of their business empire, and the huge extent of the money raised to fund the takeover, the risk of a searching monopolies inquiry would have increased so jeopardising their bid's chances of success.
'The Government, reassured by Kleinwort Benson's support for the Fayeds' claims about their business empire, and about the money coming from their own resources, allowed the deal to go through in just 10 days.'
Channel 4 treated us to a rerun of the infamous interview, at the time of the takeover, with John MacArthur, then, but not now, spearheading Kleinwort Benson's corporate finance department.
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