How Trafalgar won the Express

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From Private Eye magazine, 6th July 1979

In the City, by Slicker

Nigel Broackes’ story of how his Trafalgar House Investments Group acquired Beaverbrook Newspapers – as serialised in The Observer on 1 July – does not tell the full story of how the Daily Express was won.

It omits the never-before-told story of why Sir ‘Jams’ Goldsmith and ‘Tiny’ Rowland of Lonrho failed to outbid Trafalgar for the newspapers they both had coveted before Broackes came on the scene.

Details of this affair cast an interesting light not only on Goldsmith’s attitude to business but also on the financial status of his offshore group two years ago when he launched his bid to become a Panamanian Press baron.

The story begins in late April 1977, when Goldsmith contacted Rowland with a view to jointly acquiring the Evening Standard, then threatened by closure. Following a meeting on 29 April between the two tycoons, it was proposed that a new company would be formed, owned 50/50 by Cavenham and Lonrho, which would make any takeover bid for the Standard or possibly the entire Beaverbrook empire. It was also proposed that into the new company would be transferred the 35% holding of non-voting Beaverbrook ‘A’ shares acquired by Cavenham in January.

Details of this ambitious venture were left to be sorted out into a draft agreement by the lawyers acting for the two great men, which for Goldsmith meant the irreplaceable Eric Levine. However, by the time in late June when Trafalgar was about to make a surprise bid for Beaverbrook, no agreement had been signed.

On hearing of this move, Rowland repeated a suggestion which he had made two months before – that the joint venturers should make a cash bid for Beaverbrook, at a price above what Trafalgar was prepared to pay. The advantage of the manoeuvre was that Beaverbrook, being effectively controlled by trustees, would therefore have to accept the highest offer.

On 24 June, Goldsmith and Rowland agreed to offer £15,000,000 cash. The bid was to be financed 50/50 by Cavenham and Lonrho £7,500,000 each – and announced within a few days. The sum was a good guess as Broackes admits that ‘about £15 million’ was his maximum price.

Rowland was therefore surprised on the morning of 26 June, a Sunday, to receive a telephone call from the Anglo-French financier. Goldsmith informed his partner that he was unable to go through with the bid, and blamed a temporary problem with his £7,500,000. Rowland offered to lend the retail grocer whatever he needed. At first this turned out to be £2,000,000 and then, when the loan was readily forthcoming, £2,500,000. The deal was that either Lonrho or Rowland personally would lend Goldsmith the money over 12 to 18 months.

Goldsmith’s explanation for this purely temporary lack of readies was that he was in the middle of a large cash-raising operation for his Genéral Occidentale French master company. Further funds could not be put into Beaverbrook without changing the terms of the issues agreed with the banks who were going to underwrite (guarantee) the raising of the money. The new bid could therefore compromise the cash-raising exercise which was essential for GO’s future plans. (Later Goldsmith claimed that the money to be borrowed from the Pan-African colossus was to be used by the new joint company for buying more Beaverbrook shares rather than for the bid itself.)

In any event, it was arranged that the loan deal would be formally agreed at a meeting in Lonrho’s offices the following morning. Come the agreed time, however, Goldsmith did not show up. Instead, later that morning, Jim Slater, a friend of both Goldsmith and Rowland, appeared. His message was that Goldsmith was too embarrassed to come himself as he could not go through with the revised bid. The reason: he could not come up with the £5,000,000. He had instead retreated red-faced to Paris.

Before he left that day for the Sudan, Rowland attempted to contact the elusive grocer, but without success. However, while in flight he received a message from him, saying that he hoped any misunderstanding could be cleared up. This was not possible, however, in view of the news that greeted Rowland when he returned to London.

On 30 June, Trafalgar House disclosed it had won irrevocable support from the Beaverbrook trustees for a bid worth £14,700,000. Goldsmith subsequently agreed to sell to Broackes his shareholding, netting some £1,800,000. Hearing of this windfall, Rowland contacted Goldsmith requesting his half share in the profits – as a result of their being partners in the Beaverbrook venture since April. The amount involved was estimated by the Lonrho boss at £870,000.

Goldsmith’s response was that as no agreement on the joint venture had ever been signed, despite valiant efforts to effect it by Levine, there could no question of Lonrho qualifying for any part of the profit.

When Rowland refused to accept this interpretation, Goldsmith proposed that Slater and John Tigrette, the American businessman known as ‘the millionaire’s valet’ because of the way he attached himself to Goldsmith, oil man Dr Armand Hammer and others, should act as arbitrators. They were to decide whether there had been an agreement to act as partners on any deal on Beaverbrook and therefore an obligation to split the profit.

After studying all the correspondence and talking to the two parties, the arbitrators sided with Rowland. Needless to say, this did not meet with an enthusiastic response from the Anglo-French financier. Instead, he came up with a suggested second arbitration, this time by an independent QC. This was rejected by Rowland, who told him not to darken his doorstep again.

*Goldsmith also ran into some strenuous opposition from another quarter to his designs for Beaverbrook. 

In May 1977, Lord Goodman, former chairman of the Newspaper Proprietors’ Association, and a confidante of Sir Max Aitken, wrote to Goldsmith to the effect that he considered him not to be ‘a suitable guide for a national newspaper’.

Goldsmith accepted that this might be Goodman’s opinion but that he was as well-qualified as those who had tried and failed, i.e. Aitken.

Goodman’s assessment looks equally relevant on the eve of the launching of Now [magazine] and Goldsmith’s eyeing of Times Newspapers.

© 2005-2019 Alastair McIntyre