Читать книгу Branson - Tom Bower - Страница 15

The newspapers’ adulation cushioned Branson from the City’s scepticism.

‘No one’s buying your stock because you’re not wooing them,’ a banker told Branson. The price of Virgin’s shares had barely risen above their offer price. ‘They think Virgin is a shambles.’

‘It’s the City,’ Branson grumbled. ‘They don’t understand.’ Since he had failed to get what he wanted, the City, he concluded, was unfairly prejudiced, treating him as a hick. Blame was always attached to someone other than himself. He was blind to his own failure to explain his business adequately to the City. The victim overlooked his advantage over the past months – which he owed to the City – of enjoying an interest-free £200 million loan.

‘They’re only thinking short term,’ complained Branson, forgetting his own impatience with the failure of Event to produce rapid profits. Virgin, he insisted, was undervalued. The company’s profits, according to Virgin’s accountants, were rising dramatically yet the analysts were casting doubts. Branson, they sniffed, had failed to fulfil his promise to produce good profits in America. City analysts, Branson cursed, were a dislikeable breed, ignorant about his business. His irritation in turn aggravated the more conservative financiers.

Those same bankers, who months earlier had chuckled about their endearing client driving in a Renault 5 to meetings in the City with packets of Mates spread across the back seat, were also fathers of young children. They disliked Branson’s later collaboration with Michael Grade, the director of programmes of BBC Television, to foist crude sexual descriptions and exaggerated alarm about Aids into young children’s television programmes. Branson nonchalantly rebuffed their comments. Describing sexual acts on children’s television was quite appropriate. Branson was proud of his unconventional values.

City practitioners also mentioned rumours about ‘conflicts of interest’. Trevor Abbott was managing the finances in both the private and public companies, suggesting that Branson was managing the music and airline businesses as a single entity. Branson, they murmured, appeared to enjoy the dark. ‘You’re very secretive,’ pronounced one banker.

Branson grinned. His youthful manner normally defused tension and disputes. In London’s clubland, Branson’s decision to sell Virgin’s shares in British Satellite Broadcasting (BSB), the satellite television station, to Alan Bond, the Australian tycoon, aroused mirth. BSB had, despite Branson’s bravado, disastrously failed against Rupert Murdoch’s competition. Incompetent management, profligate waste, rivalry among the founders and bad programmes had caused losses of £60 million. He had hastened the sale after hearing from Per Lindstrand that Bond was on the verge of bankruptcy. The sale of Virgin’s 12.5 per cent stake in BSB earned a £2 million profit. With hindsight, if he had waited until 1994 when Murdoch floated BSkyB, the joint company, his stake would have been worth £300 million. But Branson’s ambition to create a worldwide media empire was flawed by his short-term attitude and his lack of creative ability. Robert Devereux’s management of Virgin’s 45 per cent stake in Super Channel and the Music Box was similarly mediocre. Neither Branson nor his brother-in-law were inspiring managers of media businesses.

‘People suspect that you’re not telling us the whole truth,’ continued the banker uneasy about new whispers that Branson was secretly buying shares in EMI, the major record producer. On this occasion the banker’s irritation could not be placated by Branson’s equivocation. Branson, his ‘waters told him’, was holding back. His instinct was accurate.

Without retaining bankers as advisers, Branson and Abbott had decided that Virgin should launch a takeover bid for EMI, a company they believed was greatly undervalued. Both were undaunted that EMI was ten times bigger than Virgin and would cost about £2.6 billion, far in excess of what Branson could raise. The birth of his secret scheme was a shambles.

Abbott’s genius was to negotiate a £100 million loan from the Bank of Nova Scotia, allowing the two to begin spending £30 million on secret purchases of EMI shares. Occasionally, Stenham and Harris, the two non-executive directors, were not told, which was a clear breach of the company’s rules. Their unusual trade provoked questions around the City whether Branson would bid for EMI. ‘These rumours,’ he replied, ‘have no basis in fact … we have no plans.’ By then, he had accumulated a large percentage of EMI shares in anticipation of the bid.

On Monday, 19 October 1987, the world’s stock markets crashed. The value of EMI’s shares fell by 20 per cent and Virgin’s share price collapsed from 160 pence to 83 pence. Undeterred, Branson wanted to launch his bid to buy EMI cheap but, he complained, Harris and Stenham vetoed his plan. Instead, they insisted that Branson should personally reimburse Virgin for its losses. His glacial stare at the directors signalled the beginning of their divorce.

That week, Branson travelled with a Virgin executive by taxi to a meeting of Parents Against Tobacco, a group which he sponsored to campaign against the promotion of smoking. The revelation of his secret purchases and his new debts had aroused anger among the bankers at Samuel Montagu. Their reluctance to defend Branson, caught in the public spotlight, intensified suspicions. ‘Give us a fag,’ he sighed to his companion. ‘I’m knackered.’

The City’s distrust could not be dispelled, even after Virgin announced a rise in profits from £14 million to £32 million. In the aftermath of the crash, most share prices remained low, and Virgin’s was stuck at around 80 pence, nearly half their original value. Abbott was alarmed. With Branson’s encouragement, he had borrowed over £100,000 to buy Virgin shares at the flotation. He had lost half his money and could not repay the banks. His secret proposal to Branson was radical. ‘Why don’t we privatise the company? Buy the shares back from the public?’ The flotation, he told Branson, had become an albatross. ‘You can’t borrow money using Virgin shares as collateral,’ he explained. ‘Nor can the music business use the cash generated by the airline.’ Branson listened. His second attempt to establish a music business in America was failing to produce profits. Abbott was proving his value, repeatedly pulling levers and shuffling money to keep the group afloat. Thanks to Abbott’s financial engineering, the recent losses of Virgin Retail had been obliterated by transferring Virgin Music’s profits to the loss-making company. Branson regarded his finance director as a Best Brain, a reliable acolyte. Privatising Virgin was a good idea and Abbott, who could retrieve all the necessary financial information from Robert Ford, the group treasurer, was the ideal mastermind of a horrendously complicated strategy. ‘Tell people I’m losing faith in the City,’ Branson ordered Will Whitehorn, his new spokesman. ‘We’re spending too much time explaining and justifying what we’re doing and we get no benefits.’ Neither Stenham nor Harris would for the moment be informed about their idea. Nor would Simon Draper. Having spent so much on cars, art and property, Branson’s cousin would surely oppose the buy-back as a threat to the value of his shares. ‘He’s lost the plot,’ Branson had sniped.

The sombre mood could not interfere with Branson’s 1987 Christmas party. Eighty business associates had been invited to the Roof Gardens in Kensington for a buffet dinner. Unfortunately, he was late, stationary on the A4 driving into London. ‘Richard is inching his way to the Hammersmith flyover,’ announced a Virgin minion over the tannoy. ‘He’ll be here soon.’ Among the guests, Don Cruickshank and Trevor Abbott kept their distance. Cruickshank’s early enthusiasm after recruiting Abbott had soured. Both had been attracted to Branson’s glamour and his heady ability to turn stones into money but gradually their different appreciation of Branson caused conflicts. While Cruickshank, the careful manager and at heart a regulator, had gradually despaired of the maverick’s addiction to a deal-a-day, Abbott had become mesmerised. Virgin, Abbott appreciated, offered the chance to become personally rich. In Virgin’s headquarters on the Harrow Road, the two men argued about Branson’s erratic lurches and his tiring lust for publicity. Initially, both deferred to a man blessed with exceptional instinct but Cruickshank favoured consistent management rather than impulses. Branson had not concealed his preference for Abbott.

At the end of a recent dinner, Cruickshank had asked, ‘Who was that sitting next to my wife?’

‘Phil Collins,’ replied another Virgin employee.

‘Who’s he?’ asked Cruickshank.

Branson’s eyes shot up. He sympathised with Robert Devereux, his brother-in-law, who, during an argument in Spain, had pushed Cruickshank into the swimming pool.

But Trevor Abbott, Branson believed, was different. The man, unaffectionately known to the twenty accountants rehoused in Holland Park as ‘Black Adder’, knew Phil Collins and loved music. After eighteen months, Abbott had mastered some of the intricacies of Branson’s financial web and had made himself appear indispensable. Working ceaselessly, he spirited the transfers of cash through dozens of different Virgin bank accounts to stave off the perennial crisis. Among the advantages of privatisation, Abbott reasoned, would be the welcome departure of Cruickshank. ‘I want him out,’ Branson had agreed.

‘Richard is now on the flyover. The traffic’s awful,’ intoned the camp voice on the Roof Gardens tannoy. Among one group of bankers, the conversation had focused on the plight of Roger Seelig, the banker, under investigation for participating in a criminal conspiracy to support the price of Guinness shares. ‘Richard has cut him dead,’ revealed one. ‘Bit ungrateful,’ commented another. ‘Considering everything, you’d think he’d stand by him.’ Branson, it slipped out, had become fascinated by Seelig’s pitch of ‘playing with shares’. The banker’s eyes rose. ‘Murky,’ he mumbled. ‘Murky.’

‘You’ll be pleased to hear that Richard has now come off the Hammersmith flyover,’ gurgled the desiccated voice into a microphone, ‘and hopes to be here in five minutes. The traffic’s awful. He says he hopes everyone is enjoying themselves and says sorry.’

In a corner, Abbott was talking intimately with a solicitor from Freshfields. Their cryptic discussion concerned the secret decision that Virgin should be privatised. Abbott echoed Branson’s complaint that Virgin was grinding to a halt. Across the terrace was Ken Berry who would fly secretly in June 1988 to Tokyo to find an investor to finance the privatisation.

‘I’m delighted to tell you that Richard has just got out of his car and he’s in the hall about to get into the lift. He’ll be with us any moment now.’ Muted cheers and shaking of heads greeted the news. Branson’s narcissism was truly exceptional. No party, he believed, could really begin without him.

His entry was modest yet the atmosphere changed. Even dressed casually in a pullover he was imposing. Smiling and greeting his guests, he had no apparent concerns about the latest financial wrangle. Juggling the debts had become a normal daily chore. Bankers, he believed, existed to be used and not feared. He disliked their scrutiny. He disliked the independent directors even more. He would spend Christmas in Necker and reveal his plans to privatise Virgin in the new year.

The welcome diversion was Mates condoms. In early January 1988, Branson flew to Russia to establish a Virgin music company in Moscow and consider organising Virgin holidays to the Crimea, a deal offered by the Kremlin over the years to Harry Bloom, Robert Maxwell and other controversial British tycoons. To his carefully selected entourage of journalists, Branson extolled his offer of giving Mates condoms to the Russians. ‘When I travel,’ he giggled, ‘I always pack my Mates condoms.’ Saucy, sexy Richard appeared to be living up to his pledge ‘to put something back into society’. But his performance concealed growing doubts about Mates. Branson had mistakenly assumed that selling sex was no different from selling records.

Although thirty-five million condoms had been sold in the first six months, a spectacular success towards capturing one third of the NHS market, the sales of Mates began suddenly to crumble. His publicity campaign evaporated. Branson’s trading loss was over £1 million and rising. Not only had shops refused to sell Mates for no profit, but the senior directors of local health authorities, the major purchasers of condoms, were rejecting Mates despite the low price. Doctors resented Branson’s gimmicks, especially his giant advertisements on hoardings. Those visiting family planning clinics were rejecting Mates and choosing Durex.

Their preference, to Branson’s irritation, was not based on familiarity. In early 1988, Colin Parker at the Family Planning Association received complaints about Mates’ shape and quality, substantiating the instinctive suspicions by doctors and their patients that the cheaper product was inferior. Men were alleging that Mates condoms ‘split’ and ‘burst’. A damaging report in the Guardian had fortunately been retracted with apologies after threats from Virgin, but the newspaper’s appraisal had been accurate. John Jackson, Branson’s appointed condom supremo, had discovered that the American manufacturer, to save money, had failed to conduct air inflation tests on the condoms. In the rush to finalise the deal, Branson and Jackson were unaware that Ansell’s factory in Alabama had also suffered production problems. Subsequent scientific research would confirm that Mates gave ‘a sub-standard response to the airburst test’. Edward Shaw, Mates’ marketing manager, reported that Branson’s challenge to Durex was provoking customers to castigate him for ‘obviously just sticking his finger in the pie because it was another big market to make lots of money’.

‘We’re getting out,’ was the message. The complaints and scepticism about his altruism were harming Branson’s image. After one year, with estimated losses of £4 million, Branson sold Mates back to Ansell (Pacific Dunlop) in return for a £1 million payment to the Healthcare Foundation. The Americans were delighted. Their association with Branson had been profitable. Thanks to his publicity campaign, especially on BBC Television, Ansell’s share of the market, after improving the condoms’ quality, would increase to 16 per cent and, after increasing prices to equal Durex’s, the company would earn a healthy profit. Branson’s declared mission to encourage a significant increase in the use of condoms had failed; and, contrary to his dire predictions, in 1999 four hundred and not tens of thousands of people died in Britain of Aids. It was a saga, like other failures, he gradually washed from his biography.

Unpleasantness was best forgotten or delegated to others. Branson, the chameleon, soon forgot condoms and focused on the privatisation of Virgin. The revelation of his plan to Draper, Harris and Stenham was assigned in February 1988 to Abbott.

‘We’re going to explore the possibility of going private,’ Abbott announced. Harris and Stenham stared silently, evidently displeased. This latest shock would be expensive and Branson did not have any cash. How, they wondered silently, could he afford to service the huge loans to buy back the shares, and repay Virgin’s existing debts of £109 million? A meeting was arranged. ‘Have you got another buyer?’ Branson was asked by Stenham, a non-executive director. ‘No,’ he was told. Branson’s hesitant style, the inscrutable trademark of the benign English amateur, placed him above suspicion, even if the doubts remained whether he was knowingly breaking the City’s rules or was unaware that the rules even existed. Anthony Salz, the solicitor at Freshfields, some Virgin executives suspected, would at some stage be consulted, but he only answered to Branson. Yet Branson’s vaunted declaration that ever since his Customs fraud, ‘Every single decision since has been made completely by the book’ was hard to dislodge.

Neither director would be informed about Ken Berry’s approach four months later to Akira Ijichi in Tokyo. Berry, looking for $150 million for a 25 per cent stake in Virgin Music, insisted that their meetings had to remain secret. The Japanese accepted Berry’s explanation: ‘We want the money for expansion. To sign new artists.’ Ijichi did not realise that Branson needed the money to repay his debts after privatisation. The president of Pony Canyon, a subsidiary of Fujisankei, the giant Japanese media company, agreed that he would come to London after making preliminary inquiries. He was delighted to be bound by Berry’s request for secrecy.

The privatisation of Virgin was the most delicate operation Branson had ever faced. He needed to conceal any negotiations with the new investors and plan how to minimise the inevitable antagonism in Britain.

Four weeks later, in early July, Frank Kane, a financial journalist employed by the Sunday Telegraph, telephoned Will Whitehorn, Branson’s new spokesman. ‘I hear that Richard is intending to take Virgin private,’ said Kane, relying on a tip from a merchant banker.

‘I’ve talked to Richard about this and there’s nothing in it,’ replied Whitehorn convincingly. ‘Even if there was, we couldn’t say because of Stock Exchange rules.’ With that careful justification, Whitehorn smudged over the truth.

‘It’s the worst deal I’ve ever done in my life,’ Ken Berry was cursing to anyone within earshot in Virgin’s offices about the planned privatisation of the company. ‘All just to bail Richard out of his filthy, stupid deals.’

Sitting on the Duende on Regent’s Canal with a group of bankers from Samuel Montagu and Abbott a few days later, Branson, dressed in jeans and barefoot, was staring at a hole in the window. ‘Someone tried to shoot me,’ he laughed. The bankers were unsure whether Branson was telling the truth or seeking to impress them. They harboured mixed feelings. Some were enthusiastic about the flippant schoolboy. Others had become disillusioned but, in the interests of earning their fees and future business, concealed their emotions. All agreed that Branson’s swift withdrawal from the stock market would terminate any chance of Virgin’s acceptance as a substantial, orthodox corporation. Ken Berry’s anger, everyone rightly assumed, referred to the huge loans which Virgin required to buy back its shares. No banker was aware of his journey to Tokyo.