If Frank Sanderson did not exist, the building and property world would find it impossible to invent him.
He is the man who tried and failed to merge Bovis with P&O in 1972, only to get thrown off the Bovis board a year later and see P&O swallow up his once-proud company at a knock-down price.
He took over the running of a struggling private company, only to see it collapse in the property crash, but bounced back as chairman of a building and printing company called Finlas from 1976. Marchwiel, the construction group, bought Finlas in 1982; Mr Sanderson stayed with the combined group for nearly three years to build its stock market reputation, then left to enlarge his family’s Beaumont nursing care company, now reversed into a quoted company.
So Mr Sanderson is making his fourth business comeback, at the tender age of 59. In his spare time he sits on the boards of the GRA dog racing group and Television South. He can be spotted entertaining in London’s Savoy Hotel from time to time: “My enthusiasm for business life has never been greater,” he says.
Mr Sanderson started his own estate agency (Malcolm Sanderson) in 1949 on a borrowed £250. Within seven years he was making nearly £20,000 a year, and he bought a small house-building company for £6,000. Bovis, the builder established in 1885, bought both these businesses for £1m in 1967 and Mr Sanderson rapidly moved into its driving seat.
Between 1967 and 1973, Bovis’ profits soared from £300,000 to £13.5m. It acquired a finance operation called Twentieth Century Banking, and the famous hummingbird logo became a familiar sight on buildings up and down the country. Mr Sanderson matched charm with toughness in his dealings with people and rarely failed to get a good press.
In 1972, merchant bankers Lazards put forward the idea to P&O and Bovis that they should merge.
Bovis, the theory ran, would add its management magic to a shipping giant which had seen better days, and lacked expertise in how to run some extensive property interests.
P&O, under chairman Ford Geddes, had been looking for new blood for some time — and briefly contemplated merging with Geoffrey James’ Compass Securities, which had to be bailed out by Guardian Royal Exchange during the property crash.
From day one, Mr Geddes was an enthusiastic supporter of merging with Bovis; he agreed that after a takeover Mr Sanderson would become joint deputy chairman of the enlarged group, and chairman of a newly planned executive committee.
Endless discussions
Fixing a price for P&O to bid for Bovis proved difficult; the relative merits of P&O’s huge asset base and Bovis’ profits record were endlessly discussed. Merchant bankers were so hopelessly deadlocked by the first week of August 1972 that the grand plan was nearly dropped. Mr Sanderson forced through a compromise a day or two later; on August 10 P&O made a £130m agreed offer.
At that time Mr Geddes was confident that he had the support of his board. He did not.
Lord Inchcape was one of the longest-servicing non-executive P&O directors. He is a retiring, stocky man with impeccable City connections — publicity-shy and rarely known to smile. His grandfather helped build up P&O; his father nurtured trading group Inchcape. Lord Inchcape believed that P&O had no need of Bovis. Mr Geddes ignored his views, so he gave them nevertheless in an interview with the Sunday Times, published on August 27.
P&O’s shares rose from 142 1/2p (when the Bovis bid was announced) to nearly 200p as rumours of a counter-bid for P&O from the likes of Trafalgar House circulated. Further opposition to the terms and concept of the Bovis deal mounted, as P&O dragged its feet issuing an offer document. When it eventually appeared, the reserved Mr Geddes and the extrovert Mr Sanderson made an odd couple at the accompanying press conference.
In mid-September, merchant bank Morgan Grenfell objected to the P&O/Bovis bid on behalf of its investment clients. Lord Inchcape’s Inchcape Group slapped a £240m counterbid for P&O on the table, and its shares shot to well over 200p. Wheeler-dealer Oliver Jessel held a major stake in P&O and drove round the City with giant stickers on his car saying: “Save P&O — tell Bovis NO!”
To fend off the Inchchape bid, Mr Sanderson agreed to revise his terms for merger downwards; P&O’s directors, increasingly uncertain about the whole affair, stuck out for still better terms. A revised offer valued Bovis at 530p a share (with P&O’s market price at 175p) compared with 475p on the original terms and original price. It would have valued Bovis at only 411p if it had been made when P&O’s shares were languishing at 142 1/2p.
A riotous shareholders’ meeting threw out the new proposals; Mr Geddes resigned. Mr Sanderson had a chat with journalists over tea at the Savoy and talked of his regret that a good deal had fallen through, while denying that Bovis was vulnerable as a result. Less than a year later a palace coup ejected Mr Sanderson from Bovis’ board room. Problems relating to the property slump and Twentieth Century Banking forced Bovis into decline.
The board restarted talks with P&O, who made a 100p offer for Bovis in January 1 74 — one-fifth the price negotiated with Frank Sanderson in 1972. Mr Sanderson campaigned as a shareholder to find a different solution to Bovis’ problems, but without success.
Today, Mr Sanderson is convinced that P&O-plus-Bovis would have prospered under his care. As it was, Twentieth Century Banking proved a real headache for P&O, and Lord Inchcape (promoted to P&O chairman after the Bovis affair and the rejection of Inchcape Ltd’s bid) never managed to improve P&O’s stodgy reputation.
Bid for P&O
In 1982, Trafalgar House made the bid for P&O (worth £290m) which had been rumoured 10 years before. Its reference to the Monopolies Commission preserved P&O’s independence, and Lord Inchcape wisely stepped down as chairman in favour of Sir Jeffrey Sterling, one of the City’s favourite businessmen. When the Monopolies Commission cleared Trafalgar’s bid, its chairman, Sir Nigel Broackes, chose not to tangle with Sir Jeffrey.
P&O merged with Sterling Guarantee Trust (formerly Town & City), and is in the process of taking over Stock Conversion. P&O shares at 566p are nearly three times the worth of the 1982 bid, and Trafalgar House is looking distinctly ex-growth.
Soon after leaving Bovis, Mr Sanderson took over the running of a struggling private company with various interests called Ambion Holdings. It suffered badly in the property crash, and the cash which Mr Sanderson raised from the P&O takeover of his Bovis share stake was insufficient to support it. The company crashed, though Mr Sanderson is at pains to point out that he later paid back trade creditors in full.
In 1976 Mr Sanderson took control of Lowe & Brydone, a quoted company involved in book printing. He tacked construction, housebuilding and property interests on to the company and changed its name to Finlas; the printing interests were demerged, and collapsed in 1982, but Finlas prospered. Marchwiel (now called Alfred McAlpine) made an £11m take-over that year. Mr Sanderson joined Marchwiel’s board.
Sharpened reputation
Alfred McAlpine is the contracting firm run by one side of the McAlpine building family (Newarthill is a publicity-shy but efficient contractor run by the other). When Mr Sanderson joined the board it was regarded as a worthy but less than zippy operation, with a reasonable but less than wonderful growth record. Finlas proved a good addition to McAlpine’s empire — a Scottish builder called Whatlings was bought soon after — and Mr Sanderson helped sharpen up McAlpine’s reputation.
But day-to-day running of the operation stayed firmly in the hands of chief executive Bobby McAlpine. Much of Mr Sanderson’s family money went into the foundation of a new company called Beaumont, run by his son Nicholas and Dr Andrew MacDonald from 1983. Mr Sanderson quit McAlpine for Beaumont in 1985; McAlpine’s board room is undoubtedly a less lively place without Mr Sanderson.
Beaumont began operations by developing a nursing home for the elderly in Kingswood, Surrey, from April 1983. Nick Sanderson, aged 26, spent five years working at Finlas before setting up a small housebuilder called Dartel in 1981 and joining Beaumont in 1983; fellow director Andrew MacDonald, aged 36, is a former country doctor and Oxford graduate with an interest in health care for the elderly; Frank Sanderson kept a fatherly eye on their early progress.
In the autumn of 1983, Beaumont bought nursing homes in Tunbridge Wells and Bexhill. Two fresh sites were bought in Croydon and Sevenoaks soon after work on Kingswood was finished. Frank Sanderson and Investors in Industry put £1m into the company in return for shares in the middle of last year, and Mr Sanderson became chairman.
In the year to November 1985, Beaumont made a pre-tax loss of £30,000 (against a loss of £80,000 the year before) on turnover of £858,000 (£387,000). Borrowings of nearly £2m were well over net assets of £1.4m. “It was apparent that there would be difficulty in maintaining the earlier rate of investment given the capital limitations of the company,” said Beaumont.
Mr Sanderson sold Beaumont’s five nursing homes to Hospital Corporation of America for £5.15m. Around 140 nursing beds changed hands in the transaction, which transformed Beaumont’s balance sheet. Negotiations to inject Beaumont, and Dartel, into a quoted insurance group called Caparo Properties were started. Frank Sanderson was back in business with a vengeance.
Caparo Properties is an off-shoot of the business empire run by Indian financier Swraj Paul. He was an ardent supporter of former Indian Prime Minister Indira Gandhi and raised a storm in his home country by buying a big stake in Delhi Cloth Mills and Escorts Engineering, against the wishes of their management, in the early 1980s.
In 1980, Mr Paul’s private company, Caparo Group, took a 21% stake in a rather tired company called L K Industrial Investments — a former Sri Lankan tea plantation operator turned into a maker of hinges, padlocks and electro-plated goods in the early 1970s. Mr Paul took control of LK in due course and changed its name to Caparo Industries.
In the years which followed, Caparo Industries took over Central Manufacturing & Trading for £14.5m and Barton Group for £9.6m. It battled for control of Brockhouse, a West Bromwich engineer, with Evered — a hyper-active industrial group run by the Abdullah brothers which now owns 20% of Tube Investments — and, after losing that fight in mid-1984, made a bid for Fidelity Radio, Britain’s only maker of cordless telephones. Fidelity put up a fight, but a £14.1m Caparao offer won the day.
The thrill of the chase rapidly turned to despair when Mr Paul unearthed some unexpected problems at Fidelity, and alleged that its former directors and accountants had overvalued its stocks and profits. He issued writs against them, made huge write-offs against the acquisition, and is now fighting to get back in the City’s good books.
Mr Paul set up Caparo Properties well before the Fidelity affair. It was formed out of a loss-making company called E Austin, involved in pest control and fork lift trucks, where CI took 75% control in 1983. Out went Austin’s industrial interests; in came bits and pieces of property owned by CI, largely comprising industrial estates in the West Midlands (valued at £3.6m) and industrial property in Hertfordshire (£1.75m). CP’s net worth was £3.4m (40p a share); Peter Thorneycroft (aged 37) of Elliott Son & Boynton and Geoffrey Sharples (aged 42), a former boss of William Whittingham, became directors.
Shareholders in CI were offered CP shares at 32p. In the months that followed CP bought and sold a strategic share stake in struggling property group Dares Estates at a profit, and backed the merger of Blacks Camping Group with Greenfields Leisure. Profits in calendar year 1984 were £188,000 (£157,000) and Mr Paul was optimistic on prospects. But in calendar year 1985 a provision of £728,000 had to be made against a fall in value of CP’s shares in Greenfield/Blacks; pre-tax profits halved to £86,000 and extraordinary losses took CP’s net deficit to £699,000. Borrowings were well over shareholders’ funds.
Name change
So in mid-December, Mr Paul agreed to buy Frank Sanderson’s Beaumont and Dartel for £3.5m by issuing new shares at 40p to the vendors (who ended up with 53% of the enlarged group). CP is changing its name to Egerton Trust, which emerges as a group with net assets of £6.34m.
Now Mr Sanderson is firmly in the saddle, and Egerton’s share price is buoyant at 65p. Dartel is building up a housing programme in the prosperous South East, and bringing forward plans for a 33-bedroom nursing home and sheltered homes in Stratford upon Avon. It has two other large sheltered accommodation schemes, at Welling and Welwyn Garden City (making a total of 160 units), and small nursing homes planned at Camberley and Coventry. An exciting 20-acre scheme in south-east England, envisaging leisure and living facilities for the elderly (and the young) in a village setting, is being discussed with the planners.
Egerton has net borrowings of around £1.5m, which will probably rise as the year progresses. Given a fair wind, the company could make profits of up to £1m this year, indicating that the shares are standing on 14 times’ earnings. The market will probably demand more evidence that the Sanderson magic is working before sending the shares still higher, but Mr Sanderson is working hard to ensure that his many fans will not be disappointed.
