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(Continued from overleaf)
This was the first attempt to show how High Street stores could be revitalised -- and led to a rash of department store takeovers. Unfortunately it didn't work for us, mostly because everything we did was subject to inquiry.
My obsession was to see that Lonrho benefited from this very carefully built expansion plan, centred on House of Fraser, which could have been carried through either as a major shareholder with the goodwill of the board, or as an owner, and Harrods' fair profit record -- the only one in the House of Fraser group of stores -- was as asset to the realisation of the whole, and its name was internationally known.
A month or two later, at Hugh's introduction, Lonrho was able to buy a further block of shares from an American stores group, and added together, these two blocks amounted to a holding of 29 per cent in House of Fraser.
The first step was to acquire the outstanding shares in Scottish & Universal Investments, to consolidate our interest in House of Fraser. Our
offer, supported by Hugh but opposed by the majority of the board, was finally passed by the Monopolies Commission in 1979, after nine months of hearings.
Lonrho then owned Scottish & Universal outright, and also 29 per cent of House of Fraser, and was represented by two seats on that board. I took one, and Lord Duncan-Sandys the other. For the first time we saw the workings of the large stores group at close hand; and it was unimpressive.
There was no team spirit aimed at improving House of Fraser, which overall really needed considerable thought to protect the future of its High Street department stores. The directors seemed intent on preserving what they had, and, to do that, they wanted Lonrho at a safe distance; I was also at fault in thinking that any chilliness towards us would be thawed by Hugh and that we would be able to reach a working understanding leading eventually to an agreed takeover or a merger and a development programme.
We were confident enough that we were going in the right direction to start substantive talks with Woolworth's chairman in New York and to put National Car Parks on offer to the House of Fraser board.
A decisive moment came soon enough, when members of the House of Fraser board took independent advice on Lonrho's first proposals for House of Fraser and they turned to the merchant bank, Warburgs. Warburgs at once insisted in having two representatives on the board to lead opposition to change, and to obtain practical control of the company by persuading the directors to form an inner executive committee which circumvented the board and especially Sir Hugh. I thought it highly improper, but the law allows it and the directors enjoyed it.
The more visible of the two appointees was Roland Smith, a vocal professor of marketing from Manchester, who had unsuccessfully applied to join the Lonrho board the year before.
Roland Smith, assured through Warburgs of the underlying support of investment institutions, cheerfully got rid of me as deputy chairman and, with less cheerfulness, asked for Sir Hugh's resignation. He then took over as chairman. His assets were a bluff sense of humour and an ability to carry out Warburgs' instructions. He marketed his own personality well, but, in my opinion, showed no management skill or ability which could benefit the business of House of Fraser and indeed, he didn't stay with it long.
Our plans for House of Fraser were stalled, and our one-third ownership ineffective, unless Lonrho made an attractive offer for all the shares. We did, and were referred to the Monopolies and Mergers Commission. We'd seen them so often, it was becoming a grind for both sides.
Twenty-three copies of each of many hundreds of documents, a complete detailed scheme for the future of the Lonrho group and its workforce, complete documentation of Lonrho from 1961 onwards, personal evidence from all senior overseas executives, evidence at length from group bankers, audited accounts from the entire group, working forecasts for every aspect of the business of House of Fraser, two senior counsel, three junior counsel, six solicitors -- none of this can adequately express the expense, detail and disruption of the Monopolies hearings.
After a year, the majority of Commissioners refused permission to bid, on grounds that the public interest might be harmed and, going further, instructed us to promise not to bid again unless we could show that circumstances had changed.
Lonrho's directors then agreed not to bid without the prior permission of the Department of Trade. We were to regret signing that undertaking, and I do not think that any public company should agree to open-ended ad hoc restraints of this kind. It was subsequently used by Norman Tebbit, as Secretary of State at the Department of Trade and Industry, to unfairly restrain a Lonrho bid while he pushed another pony past the post.
So Lonrho's offer was torn up -- but we didn't understand what was wrong with us. 'Public interest' and 'change of circumstances' were vague excuses, we thought, for not permitting an offer whose target company was never part of the commanding heights of the British economy, and which was fading for lack of impulsion.
NO definition of what harm might be done to the public interest was ever given. An inadequate and embarrassed reference to our ownership of Brentford Nylons was floated as a possible reason for disallowing our bid. Brentford Nylons was then worth no more than a few million pounds, and was an absurd excuse. The principal newspaper leader writers all agreed that Lonrho's treatment at the hands of the Commission was shameful, when the deliberations were published.
During the next couple of years, the board of House of Fraser, advised by Warburgs, took many decisions which we thought were mistakes, and some which we thought were outrageously harmful to its long term commercial interests. It was a matter of different opinions, perhaps. The profit record continued to be poor and many stores were moribund.
Lonrho was not successful in persuading them on any point, nor would they support any point, however constructive, which was put forward by Lonrho's representatives. Board meetings became a farce. We were not permitted to bid, they knew we were not permitted to bid, and finally in 1983 House of Fraser, hoping to change the DTI injunction into something more permanent than 'wait until a change of circumstances', accused Lonrho of manoeuvring to attain influence over further blocks of shares or of secretly owning other blocks of shares or acting in concert in concert with other shareholders -- it was unclear what the accusation was.
They had a friend at the DTI in Sir Alexander Fletcher, and Under Secretary of State, and he was sympathetic to the idea of a further inquiry. His latest Minister, Cecil Parkinson, was on holiday in the Bahamas, but a single telephone call from his colleague, Fletcher, persuaded him to give the go-ahead for yet another inquiry into Lonrho.
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