Aviva’s £7 billion bid bungler

March 26, 2006

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Whatever happens to Richard Harvey during the rest of his illustrious business career, he will always wear the tag of the man who bungled the £7 billion takeover bid for Prudential Insurance.

Harvey, group chief executive of Aviva, the world’s sixth largest insurance group, posted the bid for the Pru but somehow it got leaked, then Harvey let it be known that he wouldn’t sweeten the terms but this was corrected a short while later via a statement to the London Stock Exchange.

Then the Aviva board formally withdrew the offer.

Such a foul-up is most unusual for Mr Harvey who, at 55, is one of the most successful leaders in the global insurance business.

Born in Gloucester and educated at the University of Manchester where he achieved a degree in mathematics, he has come a long way in the past 14 years. In 1992 he was running the far-flung New Zealand outpost of Norwich Union, a medium sized mutally owned British insurance.

Three years later he was spotted by the board as a star for tomorrow and  appointed to the Norwich Union board, becoming group chief executive in 1998.  Mirroring the dramatic transformation of Norwich Union through a series of mergers, including Commercial Union, the ‘don’t make a drama out of a crisis’ company and more recently the motoring group  RAC, he found himself in the top job at Aviva.

In the lead up to the bid for the Pru, he surprised the City by announcing Aviva’s best-ever performance in general insurance – an operating surplus of £2.9bn, well ahead of the £2.65bn consensus forecast of analysts and 29 per cent higher than 2004.

Industry observers expect Harvey to dust himself down and then look at the Pru again at some time in the future.

Thanks for reading Big Business

David Davis
writer4business.com

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Capita Chairman Aldridge Resigns Over Labour Loan

March 23, 2006

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Ron Aldridge today became the first victim of the Labour loans scandal. 

He resigned after 22 years as executive chairman of Capita Group Plc, saying that the company’s “reputation is being questioned because of my personal decision to lend money to the Labour Party”.

Aldridge, 56, added “There have been suggestions that this loan (£1 million) has resulted in the group being awarded government contracts. This is entirely spurious.”

Capita, the U.K.’s biggest supplier of administrative services, in February reported a record annual profit after the London-based company renewed contracts and won new business, including orders from the Government.

The company manages payments for London’s congestion charge that drivers pay for using central streets. Capita, which also collects television license fees for the state-owned British Broadcasting Corp. and works with companies such as Alliance & Leicester Plc, has won four contracts worth £360 million pounds this year, including one with the Department of Trade and Industry and a 10-year human resources project with the BBC.

Some newspapers have reported that in recent years  Capita has gained Government contracts worth more than £2.5 billion.

Aldridge, who will become non-executive chairman until the end of July, has led Capita since its formation in 1984 within the Chartered Institute of Public Finance & Accountancy (CIPFA). In 1987, he headed the management buyout of the business from CIPFA and Capita became a public company listed on the London Stock Exchange in April 1989.

Prior to Capita, Rod worked in local government for ten years at East Sussex County Council, West Sussex County Council, Brighton Borough Council and Crawley District Council. In 1974, he joined CIPFA where he was the Under Secretary with special responsibility for technical services.

He was awarded an OBE in the 1994 New Year’s Honours List and was given the Freedom of the City of London in March 1996. He is a Trustee of the Prince’s Trust and a Board member of The Prince’s Trust Trading Company.

Thanks for reading Big Business

David Davis
www.writer4business

Sir David Arculus: Resigns before official CBI announcement

March 20, 2006

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The next president of the Confederation of British Industry, Sir David Arculus has surprisingly resigned before taking up the leadership of Britain’s employers’ organization.

The reason?  Severn Trent Water, the main subsidiary of the FTSE 100 water group Severn Trent that he chaired between 1998 and 2004, is under investigation by the Serious Fraud Office.

Severn Trent Water was recently £42m fine by the industry regulator, Ofwat, for supplying bad debt figures that were “either deliberately miscalculated or poorly supported”. As a result, Severn Trent Water’s customers have been overcharged.

Sir David’s plc board was exonerated of blame, but were criticized for its handling of the company’s internal investigation.

He has resigned ahead of the CBI issuing its own agreed statement later today; he feels he has done nothing wrong but does not want the CBI’s reputation being tarnished by any newspaper campaigns against him.

Educated at Oriel College, Oxford Sir David, whose first job was as a Voluntary Service Overseas teacher in the Falklands Islands, has also just stepped down as chairman of mobile group O2 following the takeover by Telefonica, the Spainish company.

Sir David, 60 in June, will continue to look for a FTSE 100 chairmanship. He lost out for the top job at Lloyds TSB and has turned down Trinity Mirror because he regarded it as a backwards step. In the meantime he is a non-executive director at Barclays Bank, and Pearson, the publishing group and he also remains on the Telefonica board.

Thanks for reading Big Business

David Davis
www.writer4business.com

Clare Furse sits tight – and the price goes up

March 16, 2006

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The Economist got it right when it said in 2001 of Clara Furse’s appointment as the first woman chief executive in the 228 year history of the London Stock Exchange:

“Pretty in pink, petite and partial to pearls: it would be easy to misjudge Clara Furse…she has built her career in the world of derivatives-broking on a reputation for ruthlessness.”

Today, the woman. long regarded by some as awkward, charmless and argumentative, her obduracy is at last reaping full rewards. Courted by Australian, German and French exchanges, she has steadfastly refused to relinquish the LSE’s independence, even though not long ago some advisers were urging her to do a deal at half today’s share price.

The 47-year-old investment banker started her career in the City of London almost two decades ago and has played a lead role in the growth of the financial futures industry since 1990 when she was appointed a director on the board of Liffee, the London International Financial Futures Exchange, and until May 1999 she was deputy chairman.

Mrs Furse was born in Canada to Dutch parents before being educated in Colombia, Denmark and England.

She is married with three children and lives in South London.

Mrs Furse studied economics at “the other LSE” – London School of Economics – then joined Philips and Drew as a commodity broker in 1983.

In later years she was appointed a director of the company, which subsequently merged with Union Bank of Switzerland and changed name to UBS Phillips & Drew. The bank changed name again following its merger with Swiss Bank in 1998 this time to UBS.

By the time Mrs Furse left the company following the merger she had been a managing director at UBS for five years and global head of futures for four of them.

She stayed in her next job as chief executive of Credit Lyonnais Rouse until December 2000, moving to the LSE the following year into what many regard as the hardest job in the City of London.

Thank you for reading Big Business

David Davis
www.writer4business.com

Outsider Sam Laidlaw is Centrica’s new chief executive. Is a bid on the way?

March 14, 2006

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The appointment of Sam Laidlaw as chief executive of Centrica , by-passing two hotly tipped internal candidate, signals that  the owner of British Gas expect to be involved in the energy industry’s current enormous consolidation.

With speculation that Russia’s Gazprom is said to be mulling a bid and the $72 billion merger between Franco-Belgian energy group Suez and Gaz de France, observers believe Laidlaw has been chosen because of his experience in big deals – just 50 he is best known for revitalizing and later selling out Enterprise Oil to Shell in 2002 for £3.5bn before becoming president of America’s Amerada Hess.

He joins Centrica from oil giant Chevron where he was executive vice president of global business development.

His appointment sees the company overlook finance director Phil Bentley, who was an original frontrunner, and Mark Clare, deputy chief executive and managing director of British Gas, who was also considered, to replace out-going chief executive Sir Roy Gardner who is expected to become chairman of catering group Compass.

Laidlaw received a master’s degree from Cambridge University, was admitted to practice law as a solicitor in 1979 and obtained a master’s degree in business administration from the European business school INSEAD in 1981.

He has been active in various industry and civic organizations, including serving as president of the United Kingdom Offshore Operators Association, chairman of the Petroleum Science and Technology Institute, and a member of the United Kingdom Energy Advisory Panel. He is a member of the United Kingdom Council of INSEAD; a non xecutive director of Hanson PLC; and a trustee of RAFT, a medical charity. Laidlaw also serves as a fellow of the Royal Society of Arts and a director of the Business Council for International Understanding.

Thanks for reading Big Business

David Davis
www.writer4business.com

Rise & Fall of Sir Christopher Gent

March 13, 2006

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With thanks to this BBC chart, the rise and fall of Vodafone’s share price over the past nine years reflects the career of Sir Christopher Gent, the man credited with turning the company into one of the world’s top mobile phone operators.

In the wake of the row that has split the Vodafone board, Sir Christopher is now giving up the honorary post of life president, the title he was given when he stepped down as chief executive and left the company at the end of July 2003.

Sir Christopher, who is 58, always looks the part as a British corporate captain. Trademark pinstripe suites, expensive shirts, the colour just a touch too loud and braces, mostly red.

He was educated at Archbishop Tennison Grammar School, a stone’s thrown from the Oval Cricket Ground in south east London. He left at 18 to become a management trainee at Natwest Bank and four years later he left for Schroder Computer Services; in 1979 he moved to Baric, another computer services company.

In 1985 he joined Vodafone as managing director of the UK network and within three years was appointed to the board, becoming chief executive in 1997. At that time the company had a market value of £7.5bn; when he resigned as chief executive ut was a £77bn mobile phone behemoth, operating in 29 countries, and with more than 100 million subscribers.

In 2001 he was knighted for services to the mobile communications industry.

The secret of Sir Christopher’s success was simple. During his acquisition spree, snapping up one mobile phone operator after another, he rarely paid cash.
Most deals were settled in return for Vodafone’s high-flying stock.

But then the telecoms bubble burst, the share price plummeted, profits become losses. With the appointment of a new chief executive, a relatively unknown Arun Sarin, the era of grand acquisitions was declared over and the company’s strategy now is organic growth.

The share price continued to tumble and a public war broke out at the top of the company as ‘Gent’s men’ left….finally Gent himself announced he was giving up the life presidency.

It’s a sad ending to a great business story, yet don’t feel too sorry for Sir Christopher who has become a very rich man, earning as much as £12 million a year (including share options) at the peak of the company’s fortunes.  Moreover he is now non executive chairman of pharmaceutical giant Glaxo Smith Kline and sits on various other boards, including bankers Lehman Brothers.

Thanks for reading Big Business.

David Davis
www.writer4business.com

Billionaire brothers’ website

March 13, 2006

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Property investors David and Simon Reuben (left and right)  with a combined wealth of  £2.1bn are among the British newcomers to an expanding list of billionaires compiled by Forbes magazine for 2006, highlighting what has been another bumper year for the world’s super rich.

What is even more remarkable about the Reuben brothers is that, unlike most other super rich, who are normally reclusive, they have a detailed and comprehensive website that traces their lives and how they made their money over the past 35 years.

They started in metals, a business they sold in 2000 and moved into property in the UK and overseas. For the rest of the Reubens story click here

Thanks for reading Big Business

David Davis
www.writer4business.com

NHS & Vodafone bosses rewarded – for failure!

March 9, 2006

Two top bosses lost their jobs yesterday – and came away with huge rewards for failure! 

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Sir Nigel Crisp, Chief Executive, (above) fell on his sword because the National Health Service is hundreds of millions of pounds in the red and the service is cracking at the seams.  His reward?  £100,000 a year pension and elevation to the House of Lords as a Life Peer.

He joined the NHS in 1986 from a background in community work, where he worked in Liverpool and Cambridgeshire, and industry. He was chief executive of various hospital trusts before taking on the NHS in December 2006.

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Peter Bamford, the marketing chief of Vodafone, (above) the troubled telecoms company was pushed, largely for the company’s failure in 3G, the next-generation technology.  His reward?  £1.5 million year’s salary.  He also owns shares currently worth £6 million.

Before joining Vodafone in 1997, Bamford held senior positions with Kingfisher plc and Tesco PLC and was a director of WH Smith PLC.

Thanks for reading Big Business

David Davis
www.writer4business.com

Vincent invests in Gita’s women’s fund

March 5, 2006

I hear that two people featured in Big Business in February have decided to go into business together.

Property tyconn Vincent Tchenguiz has pledged £2 million to the Trapezia Investment Fund created by Gita Patel as the first dedicated to back women-friendly companies.

Gita is reported as saying:  “Having the backing of Vincent is incredible. It is not easy to gain contacts like him because the gatekeepers of the financial world are often very insular. But he loved our concept immediately and wants to look at exporting the brand”.

Although purely coincidental, I’m chuffed that two of my ‘movers and shakers’ are collaborating in this way. I hope it works out well because both of them are people who really make business tick these days.

Thanks for reading Big Business

David Davis
www.writer4business.com

Arun Sarin: Vodafone’s boss under seige

March 5, 2006

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Arun Sarin is a man under siege. The head of Vodafone, the mobile phone company and one of the most powerful businessmen in the world is facing eroding shareholder confidence in the effectiveness of his own personal performance, increasing pressure from telecoms competitors, the risky launch of the 3G generation of phones – all this plus a powerful internal vendetta against him the top of his own firm.

He was a relative unknown when in the summer of 2003 he was appointed the new chief executive in succession to Sir Christopher Gent, the man who recreated Vodafone into a global network operator through a series of big acquisitions, culminating in the £101 billion purchase of Mannesmann in 2000. 

While Gent is a charismatic man who spoke with passion and certainty, Sarin is more circumspect, more ready to admit that there are some things he doesn’t know. In a way, that makes him more human.

The son of middle-class, but not hugely wealthy, parents, Sarin excelled at school, especially in languages and mathematics; he gained a place at the elite institute of technology in Kharagpur, the equivalent of America’s MIT in the US.

Young Sarin wanted to join the army but his mother, a powerful influence on the family, thought that business would be a better bet. He took her advice and did what countless others do – took off for America.

After graduating from Berkeley, the University of California with an MBA, Sarin became a management consultant. But in the late 1980s he joined a company that would bring him into contact with Vodafone. It was called Pacific Telesis, a telecommunications group that eventually demerged its mobile arm, Airtouch, in 1993. When Gent struck a merger deal with Airtouch in 1998, it was Sarin who helped to cement it. As a reward, Gent made Sarin head of Vodafone’s American operations.

And when Gent launched his hostile bid for Mannesmann of Germany, Sarin helped the Englishman garner support from US shareholders for the takeover.

Since moving into Gent’s chair, nothing seems to have gone right for Sarin:

  • Feb 2004: Vodafone suffers a rare defeat, after its $38bn cash bid for AT&T Wireless, the US number three, is beaten by Cingular
  • Dec 2005: Arun Sarin’s first big deal. Buys Telsim of Turkey for $4.5bn, but he is criticised for overpaying.
  • Feb 2006: Shock writedown of £28bn amid a warning about slowing sales. Criticism of Sarin mounts

Now in recent weeks there is growing speculation that from former Vodafone directors are waging a whispering campaign against 51 year old Sarin.  It is even rumoured that Gent, now the company’s life president but without any executive responsibilities, had wanted to vote against Sarin’s re-election at the last annual meeting but was persuaded to drop the proposal at the 11th hour.

A rare ray of sunshine for Sarin is the possible sale of Vodafone’s struggling operations in Japan for around £6 billion and £8 billion. If it goes through, the proceeds would be returned to shareholders, making them a little happier.

Thanks for reading Big Business

David Davis
www.writer4business.com