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THE OBSERVER,
Thursday, 30 March 1989
THE HARRODS SAGA
House of Fraser: The 10-year war
1979 -- In March the MMC [Monopolies and
Mergers Commission] publishes a favourable report on the SUITS bid [i.e. Lonrho's bid for major House of Fraser shareholder Scottish & Universal Investments] but says its view could change should Lonrho bid for House of Fraser. Lonrho completes the SUITS acquisition in June and builds its House of Fraser stake to 29.9 per cent.
1980 -- In August Professor Roland Smith and Ernest Sharpe -- nominees of S.G. Warburg -- go onto the House of Fraser board. Smith replaces Rowland as non-executive deputy chairman. An executive committee excluding Rowland and Lord Duncan-Sandys is formed.
1981 -- In January Sir Hugh Fraser is removed as Fraser chairman. Smith replaces him. Lonrho bids for House of Fraser, valuing the company at £226 million. The bid is referred to the MMC. In December the MMC finds that the bid is against the public interest. Lonrho gives undertakings that it will not increase its stake above 29.9 per cent. The door is left open for Lonrho to make representations to the government aimed at obtaining a release from the undertakings.
1982 -- In January Lonrho writes to the Secretary of State for Trade & Industry seeking a release. The matter is referred to the Office of Fair Trading. Sir Hugh resigns as a director in February. In September Lonrho says it does not wish to renew its bid at the present time but commences a campaign to demerge Harrods from House of Fraser. In November an EGM passes a resolution to formulate proposals to demerge.
1983 -- Demerger is voted down at an EGM. Lonrho requisitions another EGM to be held after the AGM in June. This time Lonrho's demerger proposal is passed. In August the DTI appoints John Griffiths QC to investigate House of Fraser's allegations that certain shareholders are acting in concert with Lonrho as evidenced by the changes in votes on de merger at the two EGMs. The inquiry is extended when Lonrho alleges that other shareholders are acting in concert with Fraser's majority directors.
1984 -- In May Lonrho requisitions resolutions -- later withdrawn -- to be put to the AGM. The resolutions would have increased Lonrho's representation on the demerger proposal. In May the DTI refers the issue to the MMC. In August the Griffiths report is published. No concert parties are found. Rumours suggest Lonrho's stake is for sale. Lawyers representing the Fayeds approach the Fraser board. 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 Fraser stake. The Fayeds pledge to remove Rowland and Lord Duncan-Sandys from the Fraser board. Lonrho raises its Fraser stake to 6.34 per cent.
1985 -- Mohamed and Ali Fayed replace Rowland and Lord Duncan-Sandys on the Fraser board. On 4 March the Fayeds launch a £615 million bid for House of Fraser. On 14 March Tebbit rules out a referral to the MMC and finally releases Lonrho from its undertakings not to bid. By then the Fayeds have more than 51 per cent of Fraser's shares. On 24 June as pressure grows, Kleinwort Benson, the Fayeds' advisors, confirm that the Fayeds bought Fraser with their own money. Lonrho and The Observer continue to allege that the Fayeds did not buy Fraser entirely out of their own resources. In October the Fayeds complain to Leon Brittan, the new Trade Secretary, about Lonrho and The Observer. The OFT says the file is still open. Lonrho tries to pressure Brittan but to no avail.
1986 -- Lonrho and The Observer continue their campaign. By now the Fayeds have issued three libel writs covering 16 articles against the newspaper. The Observer publishes evidence of the Fayeds' modest beginnings and beats off injunctive proceedings.
1987 -- Lonrho asks the High Court to compel Paul Channon, the now Trade Secretary, to reach a swift decision to refer the House of Fraser takeover to the MMC. In March the application is refused to give Channon more time. Lonrho issues a writ against the Fayeds, Kleinwort Benson and former director John MacArthur alleging fraudulent conspiracy. The action is thrown out but subsequently partly reinstated on appeal. On 9 April Channon appoints inspectors to investigate the House of Fraser takeover under Section 432 of the 1985 Companies Act.
1988 -- The inspectors deliver their report to the now Trade Secretary Lord Young on 23 July. The Fayeds write to Young that it would be improper for the report to be published. They are told they will be given 72 hours' notice of publication. On 29 July, the report is passed to the Serious Fraud Office. A copy is given to the OFT. On 16 September Young says the report will be published as soon as possible. On 29 September the SFO says it needs more time to investigate. Young says that, as a result, the report cannot be published for the time being. Lonrho initiates proceedings for judicial review on 11 November. On 25 November Young announces that the takeover will not be referred to the MMC, and says the report will not be published for the time being.
1989 -- On 17 January the High Court orders Young to refer the House of Fraser takeover to the MMC and tells him to reconsider his decision not to publish the DTI report. The Court of Appeal on 20 January overturns the Divisional Court, and Lonrho says it will appeal to the House of Lords.
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