MONEY Joseph and the textile pharaohs
NICHOLAS DAVENPORT
It is difficult to imagine a textile industry without Joe Hyman. It is like having to watch soccer without George Best. I can only hope that like George Best Joe has merely been suspended for a time, but since the board of Viyella dismissed him from all his executive posts on 10 December no ex- planation of this boardroom row has been forthcoming from either side. Which is strange, knowing Joe's talkativeness. A Caesar who has been stabbed in the back and lives to tell the tale should be expected to make at least a farewell speech. Joe's departure left a power vacuum and it was not surprising that ta moved in quickly to fill it.
On 23 December they made a bid for Viyella worth nearly £50 million—offering to exchange la shares for Viyella on the basis of two ict for nine Viyella which valued Viyella then at 12s 5d—and they declared their intention to marry Viyella to Car- rington and Dewhurst, another large textile company. Here was an honest attempt to im- prove the structure of the textile industry without waiting for the IRC to intervene and perhaps make a mess of it. Clearly to was breaking the Board of Trade's recent ban on further textile mergers and its own policy of non-involvement with its major customers in fibres, but it protested that it did not intend to make the new Viyella a vertical in- tegration with its own business but to create a strong textile company, independently managed, which could not be taken over by rival interests. To show that it meant business ict began to buy Viyella shares in the market—below their bid price—and it is said that its holding is now 6 per cent, which is much the same as that of Joe Hyman. This immediately alerted the American Mon- santo which said that it might have to do something to protect its nylon and acrylic plants in Ulster and Scotland. Other foreign groups—Du Pont, Hoechst and the Dutch British Enkalon—would in that case also have something to say.
No further action can now be taken, apart from share market manipulation, until the Government has disclosed its hand. Somewhat ponderously Mr Wedgwood I3enn, the Minister of Technology, has set up a small group under the chairmanship of Mr Harold Lever, the Paymaster General, to consider the structure of the textile industry and advise him on the right policy `to enable the fibres and textile industries to compete most effectively at home and abroad in the hest interests of producers, users and con- sumers'. Let us hope that its report will not take too long. Mr Benn might well invite Joe Hyman to sit with the group to speed things up. In the meantime the two great fibre pro- ducers—ict and Courtaulds—have been hav- ing talks together about co-operation and there is even hint of a merger. • Certainly the restructuring of the textile industry, which used to be one of our great exporters, is not yet complete. It has shrunk to a fifth of its pre-1914 size and is now ex- porting only 3f per cent of its output against 85 per cent in the old days. Everyone knows the cause of its downfall-- tariff barriers
abroad and low cost producers in the Com- monwealth—India, Pakistan and Hong Kong—who barge into our home market. Recently Portugal has taken advantage of its membership of EFTA, where no quota ar- rangements apply, and now ranks fourth (after Pakistan) as an exporter of 'grey' cloth to the UK. To make matters worse the in- dustry has been subject to acute stock cycles----largely because of its predominantly horizontal structure. Yet consumer spending on clothing grows much more steadily than consumer spending on the whole range of durable goods.
No one saw the weaknesses of the textile industry more clearly than Joe Hyman and no one made a more intelligent and forceful effort to create a soundly based group. The development of synthetic fibres gave him his chance. In 1945 he founded Gainsborough Fabrics to manufacture textiles and built up a good reputation with customers like Marks and Spencer. Twelve years later he took over Melso Fabrics and went into the warp knit- ting of nylon as a cheaper and speedier method of cloth manufacture than the tradi- tional weaving of cotton, the spinning stages being eliminated. In 1961 Gainsborough- Melso was acquired by William Hollins, the spinners and manufacturers of the famous Viyella and ClydeIla fabrics and before the year was out Joe was asked to become chief executive of the group whose name was changed to Viyella International.
In two years he had more than trebled the profits and in 1963 ict decided to back him with a £10 million fixed loan, £1 million of preference stock and 20 per cent of the equity (paying 5.43s per share). It was Joe's ambition to create a 'multi-fibre multi-pro- cess' organisation exploiting new areas of 'growth in textiles. From nylon based warp knitting he went on to exploit the blend;ng of polyester fibres ('Terylene') with cotton, to being then the sole supplier of polyester in the UK. In 1963-64 Viyella acquired British Van Heusen (Amalgamated Cotton Mills Trust), Bradford Dyers and Combined English Mills. and this enabled their pro- duction of these new fabrics to expand apace. In another three years Viyella had grown into the second largest textile com- pany in the UK (second only to Courtaulds) and the industry's most market-orientated unit.
Then suddenly came the break with to. By mutual consent in ,1967 Joe repaid the £10 million to loan stock and ict offered Viyella shareholders its equity holding at 8s Id per share (nearly a 60 per cent profit to to). Joe showed me his polite farewell letter to the chairman of la and when I asked why he had given up his 'Marshall Aid' he said : 'I do not want to be associated with a failure'. Perhaps the disagreement was over fibre policy. Joe wanted freedom to buy fibres at competitive prices and since the break he has worked closely with Du Pont and other chemical companies in the development of new polyester-cotton fabrics for sheets, shirts, and suit materials, all of which have been highly successful.
Last year Viyella acquired the carpet manufacturing assets of Cyril Lord in northern Ireland at a bargain price and declared a big rise in 1968 profits, but 1969 brought a slow-down and the new board of Viyella has now announced a big drop in de- mand and profits in the warp-knitting of nylon. On this the shares slumped to 8s but have recovered to 1 Is. One can only imagine that the board room row was over the cult of personality. The profits of the company may have dropped 30 per cent but there is no liquidity crisis. Perhaps a ma- jority of the board wanted to sell out to la and the subsequent bid followed upon a secretly laid plot, a palace revolution in true Middle East style, the victim being a Jew. But one has not heard the last of Joe Hyman. We may yet see him heading the European organisation of some great textile giant like Burlington Industries of America, a merger with whom Mr Crosland denied to Joe when he was lord of Viyella. In more inspired days long ago Pharaoh never denied Joseph anything, but set him over all.
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