In the City
The House of Fraser saga
• The Lonrho/House of Fraser saga contains Practically every dramatic ingredient necessary to hold an audience's attention, which is just as well because it seems to have had almost as long a run as The Mousetrap. Recent events, however, indicate that we may be reaching the climax: Sir Hugh has been removed from the chair and 'Tiny' Rowland has finally made his bid. The two leading characters, 'Tiny' and Sir Hugh, obviously have more in common With each other than they do with anybody else involved. It was not altogether surprising, therefore, that they should have had a reconciliation just before this final round of events. That too had to be done in the Spectacular fashion appropriate to the affair, with a hurried journey in a private aircraft and much dashing hither and thither.
As much as anything else it is the style of these goings-on which grates on the nerves of the institutional investors and the professionals involved in House of Fraser. What they are interested in is the proper running and satisfactory development of one of the major retail groups in this country. They would like to retain their stake and see it prosper under prudent management. This is not necessarily to say that all of them would regard Sir Hugh as unfitted for the task in hand. But Sir Hugh plus 'Tiny' is a combination not really to their liking. Thus, resistance had built up to a covert takeover of the House of Fraser by Lonrho, particularly one which was achieved by a gradual extension of control through the boardroom, rather than through an outright takeover bid.
But now the game has changed. Lonrho has made its cash bid at 150p per share for House of Fraser, capitalising the latter at £226 million and the bid for control is therefore out in the open. That of course has changed Sir Hugh Fraser's position too. He has just been removed from the chair by his board, acting presumably on the advice of their merchant bankers Warburgs, as part of the institutional moves to thwart Lonrho. It may also have been the case that the majority of the board now want to fight Off the Lonrho bid and feel that they can only do so under a chairman who is committed to such a struggle. After his sudden rapprochement with 'Tiny', Sir Hugh was clearly not the man to do that. What distinguishes all this from other major bid battles is the potential popular, one might almosf say populist, appeal Primarily of 'Tiny' Rowland but also to some extent of Sir Hugh. This is a case Which has had great publicity. The shareholders of both companies have been appealed to time and time again in advertisements and have been lectured by all and sundry. They are no longer (if they ever were) a docile body of inactive rentiers. Furthermore 'Tiny' won a famous victory against the establishment with his shareholders' Support. Backed by them he outfaced revolutionaries on his board who thought him unfit to run the company, buried a report by inspectors appointed by the Department of Trade (in the sense that its highly critical findings in the end did him no harm whatsoever),triumphed over a critical liquidity situation in his company and survived with apparent impunity direct criticism by the then Prime Minister (`the unacceptable face of capitalism'). 'Tiny's' shareholders love him and the more he is criticised the more they love him.
Sir Hugh is not quite in that category. But it is nonetheless quite possible that if the shareholders get the opportunity of voting on a resolution to put him back into the chair of the House of Fraser such a resolution would be passed with the aid of Lonrho's shareholding. After all, he is the son of the founder; he bears the same name as the company; he obviously identifies with the business. Admittedly he has had a few scrapes, an excess of gambling for instance. But the British public have a notoriously soft spot for gambling and gamblers. And although the gentlemen now on the House of Fraser board who are opposed to Sir Hugh may be excellent and able people, we doubt if they would win in the popularity stakes. Furthermore the new chairman, the well known and respected Professor Roland Smith, is only a non-executive (at a reported salary of £50,000 a year or have the typesetters dropped in an extra nought?). Sir Hugh could be back before long.
Strong personalities always seem to count for more than people realise in struggles like these. And the stronger the better. This has always been the case. It was Sir Hugh's father who actually succeeded in winning a bitterly fought bid contest for Harrods itself, acting entirely on his own judgment, through brokers of his own choice and entirely without the help of any merchant bank adviser. It might not be possible to do that today. But even when he did it, it was a pretty remarkable feat and very much a personal achievement. 'Tiny' Rowland is the extreme example of the importance of personality in business. In fact very few of the really great businesses in this or in any other country have been built up without a leading personality to make the running. They will always win against the professionals or the mere representatives.
Indeed the rise and fall of major companies can often be plotted in terms of the rise and fall of the personalities involved. Perhaps the most important characteristic other than sheer strength and determination is staying power. Like the successful politician the empire-building businessman requires first-class health, the capacity to bounce back from all kinds of adversity, a belief in himself bordering on the paranoiac, and a ruthless selfishness which of course makes him entirely impossible either to live with or work for in comfort (though either may be done with excitement). In the drab institutionalised world of professional fund managers and nominee board directors, it is somehow reassuring to find that the buccaneer quality not only survives but prospers.