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(Continued from overleaf)
Another year of inquiries began, and it was small satisfaction to us to have it all dismissed. I felt there was an inside track to the DTI, and those feelings were confirmed to me later, when Fletcher offered himself to Lonrho as a 'consultant' immediately upon his retirement from the DTI. He had much to say when he came to lunch with our board, and proposed that he should be paid a high retainer and success fee for any future bids by Lonrho, something in line with the fees which he received from James Gulliver's Argyll Group. We didn't think we could or should afford him.
A bit battered by this time, we next proposed the appointment of a number of outside directors with independent experience, so that there could be some cohesion on the House of Fraser board. Although the shareholders voted against it, the margin was narrow enough to make the board uneasy again, and -- what a surprise -- at their request we were referred again to the Commission, accused of aiming at creeping control by calling for outside directors.
I began to feel annoyed, as the convoys of documents started out again from our offices at Cheapside House to the Commission's offices at New Court, Carey Street.
Back at the dull mahogany tables of the Commission, I found myself seated opposite the familiar, tall, languid figure of Sir Godfray Le Quesne, rocking gently on his chair, with his hands clasped behind his head, and his eyes closed as he listened or slept through the hearings. He'd been looking into us for four years, and knew our business backward. What am I doing here, I thought, as I gazed by the hour and by the month at the hole in the sole of his leather shoe, and wondered why Lonrho's bid was in the hands of a man who couldn't organise his own shoe repairs.
Perhaps he felt just as bored, when he astonished Lonrho's chairman early in October 1984 by asking why we didn't sell our House of Fraser shares. As if a shutter had been opened, it became obvious that a sale was the very complete 'change of circumstances' which the DTI had required. A sale, not to a business rival, but to an investment fund or an investor, would release us to bid again without any restrictions.
It was thought by the rest of the City that we would not be able to take much more, and offers for our 29 per cent had already reached Lonrho. There's a price at which any business should be sold, and we had listened to three serious proposals, although we had not invited any offer. Leonard Sainer had approached Lonrho on behalf of Sears, Hambros on behalf of Henry Djanolgy and Philip Harris, and Merrill Lynch for a partnership headed by Gerald Ronson. The sale of our House of Fraser shares to any one of these able men meant stepping aside for ever, as each one certainly intended to bid.
At the end of October, when the Commission, unbelievably, thought it necessary to extend their hearings for another 90 days, the Lonrho board accepted a cash offer from an Egyptian living in Britain, Mohamed Fayed. He'd made a cash offer of £3 per share some days previously, and told me that it would be largely funded by the Maktoum family -- but I was surprised that he completed, and raised the £138 million to buy 29 per cent of House of Fraser from us. He'd been a previous shareholder of Costain and of Lonrho, but on a very much smaller scale, and he fitted our wish to sell to someone who was neither qualified for nor capable of taking over House of Fraser.
That day, Lonrho notified the DTI of the complete change in circumstances. We were told that the Commission would continue -- and that the Secretary of State, Norman Tebbit, would consider in his own good time when the restrictions would be lifted.
House of Fraser shares were highly sensitive to any rumours of a bid, and we waited with caution and anxiety for the green light from the Ministry. And waited. Our bid was to be 380p: 300p in cash and one Lonrho share, then at 160p, for every two House of Fraser shares. We expected, based on soundings of institutional investors, that Lonrho would achieve over 50 per cent with this offer, regardless of the 29 per cent held by Fayed. Lonrho considered that he too would accept, as it offered him a profit of £35 million -- his best deal ever.
We waited. For four months the Commission continued while we argued that the change of circumstances entitled us to bid, whatever their conclusions.
Sir Godfray and his Commissioners at last conceded that no further impediment could be found -- but still Tebbit and Fletcher inexplicably refused to raise the DTI's embargo on us. I particularly remember going to see Tebbit with six Lonrho directors and our solicitors, and experiencing his 'Sod off, Lonrho' attitude at first hand. I don't think I would have believed it otherwise.
ON 4 March 1985, the Fayed brothers made an offer of £4 a share for House of Fraser. We applied twice more to the DTI for release. We immediately notified the DTI that Mohamed Fayed's representations were incorrect, and gave what information we had at the time, which was sufficient to alarm, or at least give pause for basic investigations.
On 11 March, the merchant bank Kleinwort Benson announced on behalf of its brand new client, Fayed, that they had acceptances from House of Fraser shareholders for more than 50 per cent of the issued share capital.
Three hours later a junior official of the DTI sent a note, uselessly releasing Lonrho from its undertakings not to bid.
In 10 days, the unknown Fayeds gained permission to own House of Fraser, and throughout the 10 days they put continuous lies before the public to justify the Government permissions they had got with such ease.
It was this that made me suspect collusion between the DTI's officials and Fayed, and between Fayed and Kleinwort Benson, to put forward and to accept false submissions as to the credentials, business experience and empty empire of Fayed. I had nothing against his being a wealthy commission agent -- I had everything against his cheating his way into House of Fraser, helped by Kleinwort Benson and Tebbit.
It was bitter, but funny, to see that Professor Smith had doubled his own salary before recommending the offer from Fayed, and added a pre-dated bonus for good measure.
I saw how Brian Basham of Broad Street Associates and the barrister, Royston Webb, helped venal journalists to turn a sow's ear into a golden purse, and how that golden purse was well received everywhere that it opened.
I saw how the well-documented material containing the truth about Fayed that we began to put before the DTI was received in embarrassed silence.
I saw how Leon Brittan, the incoming Secretary of State for Trade and Industry, was prepared to say he could find no wrong with the matter.
I took my first job in the City in 1936, working for Little and Company at 5 Fenchurch Street. I've been a director of British public companies for 31 years. It is the worst thing that I've ever seen in business, that deceits triumph so well, and can even find apologists when they are exposed.
I am glad that after two years inspectors were appointed, and that they have expended 18 months upon investigating the takeover of House of Fraser.
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