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The Observer
Sunday, 22 January 1989
FROM HOUSE OF FRASER TO HOUSE OF LORDS: THE STORY SO FAR
LORANA SULLIVAN and JANE RENTON
1974: Lonrho acquires 20 per cent stake in Costain construction group from Mohamed Fayed in return for Lonrho shares. Fayed becomes a Lonrho director. His brother Ali is an alternate.
1976: In February Lonrho returns Costain stake to the Fayeds, who sell it to institutions. Sheikh Nasser al Sabah of Kuwait's Gulf Fisheries buys the Fayeds' Lonrho stake. Fayeds leave Lonrho board
1977: In March Lonrho buys 24.5 per cent of Scottish & Universal Investments ('Suits') from members of the Fraser family. By July Lonrho has 29.25 per cent. In September Lonrho buys 17.5 per cent of House of Fraser (HoF), raising its stake to 19.5 per cent. Lonrho's R.W. 'Tiny' Rowland and Lord Duncan-Sandys, Lonrho's chairman, join HoF board.
1978: In April Lonrho bids for 'Suits'. Bid referred to the Monopolies & Mergers Commission (MMC).
1979: In March the MMC publishes a favourable report on the Suits bid but says its view could change should Lonrho bid for HoF. Lonrho completes the Suits acquisition in June and raises HoF stake to 29.9 per cent.
1980: In August Professor Roland Smith and Earnest Sharpe -- nominees of S.G.Warburg -- join HoF board. Smith replaces Rowland as non-executive deputy chairman. Executive committee formed, excluding Rowland and Duncan Sandys.
1981: In January Smith replaces Sir Hugh Fraser as chairman. Simultaneously Lonrho bids for HoF, valuing the company at £226 million. Bid referred to MMC. In December the MMC declares bid is against the public interest. Lonrho gives undertakings that it will not increase its stake above 29.9 per cent.
1982: In January Lonrho writes to the Secretary of State for Trade & Industry seeking a release from the undertakings. The issue is referred to the Office of Fair Trading. In September Lonrho says it does not wish to renew its bid at the present time but commences a campaign to demerge Harrods from HoF.
1983: Demerger is voted down at an egm. But Lonrho's demerger proposal is passed at a second egm in June. In August the DTI appoints John Griffiths QC to investigate HoF's allegations that certain shareholders are acting in concert with Lonrho as evidenced by the changes in votes on demerger at the two egm's. Lonrho alleges other shareholders are acting in concert with HoF's majority directors.
1984: In May Lonrho requisitions resolutions -- later withdrawn -- that would have increased its representation on the demerger proposal. DTI refers issue to the MMC. In August the Griffiths report is published. No concert parties found. On 20 August the Sultan of Brunei grants Mohamed Fayed the first of several powers of attorney. On 30 October the DTI extends the MMC investigation another three months. On 2 November Lonrho sells its 29.9 per cent stake to the Fayeds for £138 million. On 9 November Lonrho says it has purchased a 4.5 per cent HoF stake, later raised to 6.34 per cent.
1985: Fayeds oust Rowland and Duncan-Sandys from HoF board. On 4 March Fayeds launch their £615 million bid. On 7 March Rowland alleges that the Sultan of Brunei is behind the bid and demands that Trade Secretary Norman Tebbit refer it to the MMC. Simultaneously, the MMC decides that a bid by Lonrho for HoF would not go against the public interest. On 14 March Tebbit rules out an MMC referral and finally -- too late -- releases Lonrho from its undertakings. The Fayeds already have more than 51 per cent of HoF's shares. On 24 June, as pressure from Lonrho grows, Kleinwort Benson -- the Fayeds' advisers, whose former director John MacArthur has attested to their vast wealth -- confirm the Fayeds bought HoF with their own money. In October Fayeds complain to Leon Brittan, the new Trade Secretary, about allegations from Lonrho and The Observer that the Fayeds did not purchase HoF entirely out of their own resources. OFT says file is still open.
1986: Lonrho and The Observer continue their campaign. By now the Fayeds have issued multiple libel writs against the newspaper. The Observer publishes evidence of Fayeds' modest beginnings and beats off injunctive proceedings.
1987: Lonrho resorts to the courts to challenge the takeover and meets with little success. On 9 April Trade Secretary Paul Channon appoints inspectors to investigate the HoF takeover.
1988: In May the Sultan of Brunei denies that his funds were used to purchase HoF. The inspectors deliver their report to the new Trade Secretary Lord Young, on 23 July. On 29 July report is passed to the Serious Fraud Office. Copy given to OFT. On 16 September Young says report will be published as soon as possible. On 29 September SFO says it needs more time to investigate. Lonrho initiates proceedings for judicial review on 11 November. On 25 November Young announces takeover will not be referred to the MMC, and says report will not be published for the time being.
1989: On 17 January the High Court orders Young to refer takeover to the MMC and tells him to reconsider his decision not to publish. On 20 January Court of Appeal overturns Divisional Court. Lonrho says it will appeal to the House of Lords.
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