City & Business: Split imperatives

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The Independent Online
CLIVEDEN, the former seat of the Viscounts Astor, seems to be the favoured spot for business people wanting a quiet place to do some concentrated brain cudgelling. Earlier this month, the senior partners of KPMG Peat Marwick spent the day in the historic Buckinghamshire building, now a sumptuous hotel, to debate scrapping their partnership status and becoming a company.

Perhaps the place spurs powerful people on to great ideas. It can certainly lead to their downfall. It was at Cliveden that the war minister Jack Profumo first glimpsed Christine Keeler cavorting round the swimming pool, precipitating one of the great scandals of the 1960s.

This week, the directors of Thorn-EMI go there for their annual retreat. One topic certain to be on the agenda is the question of whether to split the company into two.

The separation of the two main divisions, music and rentals, has been a perennial rumour. But the speculation reached boiling point in the stock market last week. Thorn shares spurted 41p to 1039p on Thursday and Friday.

Demergers are in. Ever since ICI showed that 2 minus 1 could equal 11 2 by demerging its Zeneca pharmaceuticals business, investors have been pushing for similar conjuring tricks. Hillsdown Holdings, the food manufacturer, is under pressure to demerge its housebuilding operations. Thorn is close to readiness for a demerger, with the last remnants of its manufacturing past finally on the auction block.

But Sir Colin Southgate, the chairman, has long wanted to buy a publisher or other media business to go alongside the music division.

EMI Music is about managing creative people and distributing their products across the globe. The same principles apply whether the product is music, books, newspapers, films, computer games or TV programmes.

Sir Colin may be torn about which road to pursue. It would be a mistake to attempt both at the same time.

My guess is he'd prefer to get a big media acquisition under his belt first, and then think about a demerger. We may hear more at the AGM this Friday.