Is this the end of the line for Rothschild?

The banking dynasty scion wants to replace Bumi's board. Trouble is, he can no longer rely on the City's help, says Tom Bawden

Few dynasties have enjoyed such a stellar reputation as the Rothschilds. From the family's first forays into banking in the 1700s to its creation of an Indonesian coal miner in November 2010, the Rothschilds have enjoyed a more or less unimpeachable reputation for business that has lasted for centuries.

As recently as last May, it seemed the family had moved to the next level, as The Sunday Times Rich List estimated the wealth of 41-year-old Nat – the youngest in a line of Rothschild businessmen and architect of the London listing of the Indonesian coal miner Bumi – at £1bn.

This dwarfed the fortune of his father, Lord Rothschild, who was valued at a relatively paultry £465m, and suggested that Nat, who had something of a reputation as a party animal in his youth, may have grown up into the finest businessman of them all.

Since then, Bumi's reputation and share price have dived – taking Mr Rothschild's reputation with them – amid a series of high-profile disagreements over the running of the company, multiple top-level resignations and questions over corporate governance that suggest Nat Rothschild's ascent to the billionaires' club was based on a mirage. Bumi's shares, which began life at £10, have slumped by nearly three quarters, to close at 288.5p last night.

In the latest of what appear to be increasingly belligerent and desperate attempts to save his reputation, Mr Rothschild yesterday called on Bumi to oust 12 of its 14 directors, including its chairman and major shareholder, Samin Tan, and Sir Julian Horn-Smith, the well-respected former Vodafone deputy chief executive, who is the coal miner's senior independent director.

Representing himself as a champion of the little guy, Nat, a 12 per cent shareholder, said he "is of the view that the current board of Bumi has failed in its duties to minority shareholders and has mismanaged the Bumi group to their detriment".

Mr Rothschild's focus on the minority shareholders comes amid widespread suggestions in the City that the damage to his reputation has been so great in recent months he will struggle to attract investors for future projects.

One mining analyst said: "Rothschild's reputation has taken a big hit on this, and if he went round looking for money for start-ups he's going to struggle. Everything I see suggests it's a mess, and while I don't know how much of it is his fault, he is the one who raised the money and got involved."

The dispute between Mr Rothschild and the Bumi board has been turbo-charged by serious questions over corporate governance, with the issue becoming particularly sensitive since October, when the company revealed it had launched an independent investigation into its two Indonesian subsidiaries following "allegations concerning, among other things, potential financial and other irregularities".

Bumi was created in November 2010, when Indonesia's Bakrie brothers injected some of their coal assets into Mr Rothschild's London-listed cash shell.

Despite warnings from some quarters, the move seemed to magically unlock the value of these assets from Indonesia, a country whose reputation for corporate governance left something to be desired, by conferring on them a respectable London listing – and the legendary Rothschild name. That value has mostly evaporated.

In truth, the cracks were already beginning to show in Bumi well before last May, after Mr Rothschild was ousted as co-chairman in March when he called for a "radical cleaning up" at Bumi Resources, a subsidiary in which Bumi has a 29 per cent stake. But many in the City were still giving him the benefit of the doubt, and the reputation of the man who famously invited George Osborne to a party that he and Peter Mandelson were attending on the Russian oligarch Oleg Deripaska's yacht in Corfu remained broadly intact.

That is not the case anymore after an extraordinary fall from grace in recent months, with an increasingly bitter slanging match between Mr Rothschild and his opponents in Bumi culminating yesterday in his requisition of a general meeting to throw out most of the board.

Mr Rothschild's reputation enabled him to raise the money he used to create Bumi in a highly unusual way, persuading pension funds and other institutions to give him the funds – a cash shell – before he knew what he was going to invest it in.

He was then able to invest the money in assets which some – including Nat's Dad, who declined an offer to get involved – may have believed to be unwise, without the need to persuade any investors to back him.

It's too early to say for sure how much of that reputation Mr Rothschild will be able to claw back, but it's extremely unlikely he will ever have this kind of freedom again.

He does have some track record of making a profit, with the Atticus hedge fund he co-founded making stellar returns in the early years. But this success has been clouded by the closure of the fund in 2009 as the financial crisis took its toll, as well as a share price decline of about a fifth following the flotation of Genel, the oil company run by the former BP chief executive Tony Hayward, in which he is a key backer.

Operational performance aside, there is another concern among potential partners and backers – Nat Rothschild has a habit of publicly turning on them.

That encounter on a yacht in 2008 ended in a glorious falling out after Mr Rothschild wrote a letter to The Times claiming that Mr Osborne tried to solicit a donation from Mr Deripaska while on the yacht – an accusation the now Chancellor vigorously denied.

Mr Rothschild's letter was a retaliation against his prep school, Oxford and Bullingdon Club friend, Mr Osborne, whom he blamed for "dripping poison" to the newspapers about Gordon Brown, then Prime Minister.

And judging by Sir Julian's response to Nat's latest tirade yesterday, little seems to have changed. "Nat Rothschild's time as a director of Bumi was characterised by taking highly confrontational positions that proved counterproductive to addressing the company's issues," he said.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there