Rowland rides into Lonrho's final shootout: Empire builder ranges from Africa to Switzerland in quest for allies as his company slips from his grasp. Richard Thomson reports

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The Independent Online
TINY ROWLAND, joint chief executiveof Lonrho, sat in his Gulf Stream jet on a flight back from Libya and contemplated defeat.

It was an unfamiliar prospect for the 75-year-old businessman who has carved out, and held on to, his business empire over the last three decades through an inflexible will to beat his rivals and grind them into the dust.

He was on his way home from the latest in a series of visits to Muammar Gaddafi, the Libyan leader, made over the last two months. It is impossible to speculate on the purpose of these missions, but from banking sources it is apparent that one aim was to persuade the Arab head of state to provide him with finance to buy back the Lonrho shares he sold to Dieter Bock, the German property investor, earlier this year. So far, his cry for help seems to have fallen on deaf ears.

Tiny has also been toCredit Suisse, the Swiss bank, with the same request, and again been turned down. His increasingly desperate attempts to find the money to repurchase the shares reflects a sharp deterioration in his relations with Mr Bock, who has been joint chief executive of Lonrho since last spring and is determined to put his stamp on the company. Tiny needed to boost his own shareholding so that he could control the German before it was too late. Now he may have lost his chance for good.

The relationship between the two men appears to have come close to breaking point in the last few weeks. The final showdown may come at a board meeting on Tuesday which, if Tiny loses, will mean the end of his influence at Lonrho and, in all probability, of his business career.

Moreover,Tiny's personal wealth may also be under threat. There is persistent speculation that he has mortgaged his Lonrho share stake, laying himself open to huge interest payments, a suggestion he has always strongly denied.

The immediate issue this week, however, is the appointment of two non-executive directors - Peter Harper, a director of Hanson and Stephen Walls, chairman of Albert Fisher - both nominated by Mr Bock.

Mr Rowland not only loathes Lord Hanson and therefore anyone from his company - he hates the very idea of non-executives. He once described them as 'decorations on a Christmas tree'. Moreover, he had not been consulted by Mr Bock over the nominations.

If both the prospective non- executives are appointed, Tiny will almost certainly lose control of the 12-man board. He has three directors - Paul Spicer, Rene Leclezio and Robert Dunlop - staunchly behind him. Mr Bock has at least two who will support him in a fight - Nick Morrell, Robin Whitten - but others such as Sir Peter Youens and Philip Tarsh are likely to fall into line. With the new non-execs, Mr Bock would almost certainly have a clear majority. He also owns 18.8 per cent of Lonrho's shares to Tiny's 9 per cent - and he still has an option to buy half of Tiny's holding.

The balance of power is slipping inexorably away from Tiny, and he knows it. He may give in graciously this week and seek a compromise. But even he does, it is unlikely to be the end of the story. Confrontation will only be postponed. His natural inclination would be to fight it out to the bitter end and, ultimately, only Mr Rowland or Mr Bock alone can run Lonrho.

The story of Mr Rowland's slide from power began 18 months ago, with an astonishing deal to sell a third of Lonrho's Metropole hotels group to Libya for what seemed the hugely overpriced sum of pounds 177.5m. The middleman in the transaction was Adnan Khashoggi, the arms dealer.

Persistent rumours of a contra-deal involving joint Libyan-Lonrho investments in Africa have never been confirmed by Lonrho, and no evidence of it has emerged.

The hotels deal with such an international pariah as Colonel Gaddafi plunged Lonrho into scandal, but Tiny was desperate for the money. His company was sinking rapidly in the recession, it was haemorrhaging cash, its profits were in free-fall and its debts were heading towards pounds 1bn.

In any case, he has always had a higher opinion of Gaddafi than most people. He once famously remarked when challenged about his association with the Libyan leader, 'Gaddafi is a mere retailer in death. The Americans are wholesalers.'

Col Gaddafi for his part, was facing United Nations sanctions for sheltering the two men accused of the Lockerbie bombing. He needed a champion in the West to defend him, and he found his man. Even now, Mr Rowland is funding the Edinburgh lawyer, Alistaire Duff, who is to defend the Lockerbie bombers if they are ever brought to trial in Scotland.

Lonrho is also believed to have considered funding the making of a documentary film about the bombers which would adopt a pro-Libyan stance.

Although useful, however, the Libyan link did not solve Lonrho's financial problems, which continued to worsen. Mr Rowland twisted and turned in the search for extra finance, eventually alighting on Mr Bock, a 53-year-old multi-millionaire property and retail tycoon. Mr Bock, who had long been interested in investing in Britain, had been keeping a casual eye on Lonrho for years as a company with large undervalued assets.

Tiny also approached both Gencor, the South African mining group, and Genting, the Far Eastern hotels and casinos group, with proposals to invest in Lonrho. Terms designed by the merchant bank Samuel Montagu on Genting's behalf became the blue print for his deal with Mr Bock: half Tiny's 18 per cent shareholding at a substantial premium to the market price and a big injection of new capital.

Mr Bock's cash injection was actually less than that proposed by Genting, but his apparently less stringent demands for management changes were infinitely more appealing to Tiny, who thought Mr Bock could more easily be controlled. Mr Bock ended up spending pounds 130m for his stake in Lonrho.

Mr Rowland almost certainly viewed MrBock as a temporary solution, a stooge to be bought out or otherwise discarded once Lonrho was back on its feet. Mr Bock's understated, self-effacing style - he drives a Citroen 2CV and carries his papers in a plastic bag rather than a briefcase - probably encouraged Tiny to think he was something of a pushover. He could not have been more wrong.

From the start, Mr Bock was determined to take control of Lonrho. He moved his family to London earlier this year - first to the Intercontinental Hotel near Hyde Park, then to a handsome flat opposite Green Park.

At first, relations with Tiny were smooth, as when he persuaded him to part with the Observer for pounds 27m this summer. But then the first row broke out when he sold a property in Brussels for pounds 30m against Mr Rowland's wishes. He also began to speak publicly about how he wanted to focus the group on to the core businesses of mining, agriculture and hotels, selling off most the peripheral businesses. This went against all Mr Rowland's acquisitive instincts.

Worst of all from Tiny's point of view, Mr Bock said he would 'normalise' the company. Bankers say that, once installed in Lonrho's Cheapside headquarters he was shocked to find this publicly quoted company run more like a private company. According to City investors, he wants to introduce fuller reporting to shareholders, a reformed board structure and lower costs.

At present, Lonrho has no non-executive directors. Moreover, no board member can be sacked without the unanimous agreement of the other directors. And - against normal company practice - there is nothing in Lonrho's articles of association that says the directors ever have to be re-elected once they are installed on the board. This will all change if Mr Bock wins control.

Astonishingly - and unknown to shareholders - at least three of the directors not only receive handsome salaries but company pensions as well. Tiny himself gets pounds 1.65m in salary and a pounds 100,000 pension each year. Paul Spicer, whose chief job at Lonrho is fending off the press, receives pounds 400,000 in salary and a pounds 260,000 pension. Rene Leclezio, a virtual unknown in the UK before being unexpectedly promoted by Tiny to the position of chairman two years ago, is also thought to get a pension on top of salary.

Mr Bock also says he will cut the pounds 20m costs of running Lonrho's headquarters, probably by slimming down the 160- strong staff and cutting salaries.

But Tiny himself is at the heart of Mr Bock's problem. He is an autocrat who loves his position of power. He spends about 50 per cent of his time at the office on the telephone, often to his high-level political contacts in Africa. Acting as an elder statesman, he constantly tours the continent in the company's Gulf Stream 4 - the most expensive executive jet in its class - at a cost to Lonrho of up to pounds 5m a year. Yet there is little evidence of new business being generated in this manner.

Earlier this year, Rowland brokered a peace in Mozambique between the Renamo rebels and the Government, but at considerable cost.

Conventional wisdom on Lonrho has it that the company cannot continue without Mr Rowland's co-operation because only he understands it properly, and only he has the political contacts in Africa to make it work.

Lonrho's accounts suggest that 70 per cent of thegroup's profits come from its African operations, and are expected to produce about dollars 135m ( pounds 90m) this year.

Recently, however, Tiny's African contacts have come to look less important. One after another of his old friends have toppled from power or retired as democracy has crept through the continent. Even his private army in Mozambique looks redundant now that peace has come to the country.

Meanwhile, Mr Bock is busy proving he does not need Tiny. He has, for instance, been closely involved in the Ghanaian government's decision to float part of its 55 per cent stake in the Ashanti gold mine. The float will value the mine at up to dollars 1bn, putting a hefty value on Lonrho's own 45 per cent stake.

Tiny is bound to find the changes planned by Mr Bock hard to stomach. Lonrho is his creation, he has always followed his own ideas and at his age he is probably less flexible than he might once have been. Above all, he will find it hard to accept that he is no longer in control.

This week should decide once and for all who is to control Lonrho. Tiny Rowland may have an ace up his sleeve - as he did four years ago when he saw off Alan Bond, another entrepreneur who dared to buy shares in Lonrho. If he does not, he seems destined to cede control of the group he created, and to watch it be transformed by a younger man.

(Photographs omitted)