Stanford fighting to take control of Redbus

Demon Internet founder has requisitioned EGM to oust board of Web hotels company

It promises to be one of the most colourful City battles for years. In one corner is Cliff Stanford, the internet entrepreneur who made £30m from the sale of Demon Internet and who once claimed he'd be "bigger than Branson". In the other corner stand three executives, including John Porter, the son of the Tesco heiress Dame Shirley Porter.

At stake is the future of Redbus Interhouse, an internet venture which was once worth £200m but whose value has now dwindled away to almost nothing. The stand-off will come to a head at a shareholders' meeting next Monday where requisitions tabled by Mr Stanford will be put to the vote. He is proposing to oust three members of the Redbus board, the chairman Mr Porter, the finance director Carl Fry and the managing director Kevin Neal. In their place he wants to install himself as chief executive with Dan Wagner, the former Dialog and Smartlogik entrepreneur, as non-executive chairman.

It has already become one hell of a scrap for a loss-making company valued at just £10m. Mr Stanford, who helped found the business and who still owns 25 per cent of the shares, says the current management team have underperformed and is no longer up to the job. The company says he merely wants to revert to the spend, spend, spend days of the internet boom, ignoring the more straitened economic environment.

An astonishing amount of mud is being slung around, as both sides try to discredit the other.

People are saying that Mr Stanford's £30m from Demon has virtually gone, a result of his free-spending lifestyle. Even Max Clifford, the celebrity publicist, has become involved, acting on Mr Stanford's behalf.

Mr Stanford, 47, took out a full page advertisement in yesterday's Financial Times urging shareholders to back him. But on Friday he lost a legal action against the three directors who, he claimed, had breached the company's articles of association. With the other directors also owning a 25 per cent stake, the EGM should be quite a tussle.

"I think my chances are probably about 50:50," Mr Stanford said yesterday from his holiday home in Malaga, Spain. "But if I fail I may bid for the company, though that would be a last resort."

Mike Tobin, Redbus's sales director, says the company is confident of victory. "It's sad, really," he says. "He's realised he's going to lose and he's trying to do everything he can."

The war or words is a sad come-down for a company that was billed as one of the sexy stocks of the internet boom only a couple of years ago.

Redbus was set up shortly after Mr Stanford had sold the Demon Internet service provider to Thus for £68m. The idea was to provide "internet hosting" services from vast warehouses of expensive computers which would provide back-up for company websites. The business came to the stock market through a reverse takeover of a small clothing business called Horace Small Apparel in March. That raised £20m followed by a further £88m six months later.

The company developed data centres which can cost anything up to £12m each to build as they have ultra-secure power supplies, 40 telecoms suppliers and state-of-the-art air-conditioning equipment to cool the vast central computers.

But as the dot.com bubble burst, Redbus shares began to slide and the cash started to drain away. Mr Stanford, who had been deputy chairman, left the board in the spring. The management then implemented a new strategy involving ending all new data centre openings in order to conserve its £9m of cash. A cost-cutting programme was introduced to save £4.3m from head office expenses and lower marketing and administration costs.

Mr Stanford is not happy. "As with all Redbus ideas we got the thing started off, pointed people in the right direction and then stepped back," he said yesterday. "Unfortunately, in the intervening time, the management has lost its way. They've been late with every site opening and they have failed to adapt to a changing market. Three years down the line and they've got no new products, no new pricing and they've made financial mistakes that have cost the company millions of pounds."

He alleges that the company gave a guarantee on site in Luxembourg which could leave it exposed to legal action from the landlord.

Redbus Interhouse is hardly fulsome in its praises of Mr Stanford saying new, tougher disciplines are needed. Mr Tobin says: "There are times when you need people like Cliff. Unfortunately this is not one of them." As an example of the company's former largesse, Mr Tobin says the marketing budget at Redbus used to be £2m, an astonishing figure for a business with revenues of just £9m. "It was the first time in my life that I'd actually been embarrassed by the size of the marketing budget," he says. "And it was hard to measure any results. He wanted sites in Sweden, Copenhagen, Istanbul. It was, like, world domination. We were saying 'well, that's great, but we wanted to do it from our own resources'."

Redbus says Mr Stanford's style is aggressive to the point of being bullying. He certainly appears to enjoy himself. As well as his villa in Spain he has homes in Colombia and Belgium. He was the subject of a News of the World "kiss and tell" after being photographed leaving a London restaurant with two table dancers. And he seems to positively revel in the image of the playboy. "It was a set up," he says. "The Colombian girl was a friend of my ex-wife. We went out for dinner and were walking back. She got £40,000 from it apparently. Well, good luck to her. It didn't really do me any harm."

And he goes on. "As for doing naughty things in the back of the car. Well, my chauffeur is a friend of my mother. I can't imagine doing anything naughty in front of him. He's a man in his early 60s. I've never had two hostesses in the back of any car. I've never even had one. Perhaps I'm missing out."

If he fails to win back Redbus Interhouse, Mr Stanford will concentrate on two of the Redbus Group's two other ventures. One is LMDS, which makes landmine disposal machines. Another is Serraglaze, which produces special "light reflecting" glass for buildings which stand in the shadows of others.

Standing in the shadow of others is not something Mr Stanford is used to.