Fleming cements ties with Keswicks

News Analysis: Two of Britain's most powerful dynasties hope to revive an ailing bank

THE KESWICK family, one of the most powerful British dynasties to have made its fortunes in Hong Kong, yesterday cemented its tie with the Flemings, one of Britain's oldest banking families, in a complex deal which sees it increasing its stake in the City merchant bank Robert Fleming, from 5 per cent to 17 per cent.

Under the terms of the agreement struck between Robert Fleming and the Keswick's main Hong Kong investment vehicle Jardine Matheson, Robert Fleming will take full control of Jardine Fleming, its 28-year-old Far Eastern investment banking joint venture.

In return Jardine will receive pounds 40m in cash and new Robert Fleming shares, diluting the Fleming family members' stake from 35 per cent to just over 30 per cent. A second Jardine representative, Rodney Leach, will join Henry Keswick on the Robert Fleming board.

In a further tidying up exercise Fleming is also buying out Martin & Co, the South African stockbroker from their joint venture Fleming Martin.

The announcement coincided with a sharp fall in profits at Robert Fleming. They were down from pounds 91.1m in the same period last year to pounds 20.8m.

John Manser, the Robert Fleming chairman, yesterday hailed the deal as a great step forward. He said it would enable the firm to redeploy staff and capital more freely within the business and allow more scope for common systems.

"Quite a lot has changed in the 28 years since we set up Jardine Fleming," he said. "For one thing it is a more global world. It is also a world which works on a functional rather than regional basis."

However, the decision to increase the firm's exposure to Asia at a time when others are reigning back is brave. Unsurprisingly, there was an enthusiastic reaction in Hong Kong where most of the recent traffic has been in the other direction.

Jardine Fleming lost pounds 2.3m in the first half and despite its prominent position in the merger and acquisition advisory league tables - the investment bankers' Holy Grail - it has had to be pruned back as new issue activity has all but dried up.

Nor has the Keswicks' experience in the UK been particularly happy. They came to the rescue of Trafalgar House when it was nearly sunk by its investment in Davy, a North Sea engineering firm. The investment was not a success, and they sold out to Kvaerner, the Norwegian shipbuilding and construction group that was desperate for a UK base.

The Keswicks fared little better with their investment via their food industry group Dairy Farm in the cut-price retailer Kwik Save. With sales plummeting, Kwik Save merged with Somerfield earlier this year

When whispers first started in the City that something big was afoot at Robert Fleming, many observers expected more dramatic news, like a decision to put the firm up for sale or seek a stock market quotation.

Critics said that Robert Flemings is at a crossroads - over the last few weeks there have been a number of high-profile departures, including Tony Chambers, the chief executive of banking, and Patrick Gifford, the well-respected chairman of Fleming Investment Trust Management. The firm insists that the departures were amicable, but there is little doubt that there is unhappiness within the firm.

Some outside shareholders are also pushing for an exit. But the idea of floating the firm on the stock market or of selling out to a bigger outfit has been opposed by Mr Manser and William Garrett, the chief executive, both of whom have the family's support.

The firm's investment management business is doing well but according to insiders the advisory side of the business was loss-making in the first half. Mr Manser refuses to comment.

Many are wondering whether the decision to build up the equity research and advisory business globally in an attempt to challenge the Lazards and the Morgan Stanley's has been a mistake. Despite a good run several years ago, and a strong position in both Asia and South Africa, the firm's global position has been sliding.

Mr Gifford, for one, is said to have become increasingly frustrated at the way the asset management side was being milked to pay for the unrealistic ambitions of the investment bankers. But his plan to spin off the asset management side and sell the investment banking business did not find favour with the board.

There would be no shortage of buyers, however. ABN-Amro, the Dutch bank that owns Hoare Govett, JP Morgan, and Paribas, the French investment bank, have recently made approaches. All have been rebuffed. "I like hard times," said Mr Manser. "It sorts the men from the boys."

In a world of financial services giants, Fleming is a rarity - a firm that is not only owned by a family trust but where family members' views carry weight.

Around 12 Flemings are active in the business. Some oddities, such as the insistence on guests consuming only beer, not wine, have disappeared. But others remain.

Despite having been London-based since 1900 when the original Robert Fleming moved his investment trust business from Dundee, the firm still wears its Scottishness on its sleeve.

Its main non-family backers are Scottish institutions such as Baillie Gifford and Stewart Ivory. The firm also owns the most extensive private collection of Scottish art in existence.

It is a structure that many see as an anachronism which leaves them ill-equipped to cope with an increasingly competitive world. The unravelling of the Jardine joint venture has long been talked about and is sensible as far as it goes.

But there are those who fear it will only postpone the inevitable. "Flemings," said one frustrated non-family shareholder yesterday, "should be sold. It is punching way above its weight".

Start your day with The Independent, sign up for daily news emails
Life and Style
A still from a scene cut from The Interview showing North Korean leader Kim Jong-un's death.
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
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

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

iJobs Job Widget
iJobs Money & Business

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...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

Day In a Page

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
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'