Stepping out of Hanson's shadow
The chief-in-waiting promises a more mature conglomerate, but as Patrick Hosking finds, the love of the deal is still in place
Sunday 06 August 1995
Two events last week forced a higher profile on him. One was the sudden illness of Gordon White, the titular head of Hanson's US operations, who lies critical but stable with a lung infection in a Los Angeles hospital. His plight inevitably draws attention to the mortality of both himself and co-founder Lord Hanson, who is 73 but insisting he will stay on to January 1997. Bonham, 52, is the heir apparent.
The other event was Hanson's agreed pounds 2.5bn bid to take over Eastern Electricity. A Hanson making relatively uncontroversial things like bricks and timber can ignore public opinion. A Hanson supplying power to millions of households in East Anglia needs to tread more carefully. Utilities is the most politically sensitive of industries.
Hanson could certainly do with some good press. Long gone are the days when it was the most exciting company in Britain. In the early and mid- 1980s you might not have liked Hanson, but you couldn't ignore it, as Hanson and White pulled off an amazing string of takeovers, many viciously hostile. They made themselves and their investors very rich. By 1990 Hanson was Britain's sixth-biggest company by stock market value.
Much has changed since. Hanson has underperformed the stock market by 25 per cent in the past five years. It has dropped a few rungs, too, and is now only the 12th biggest company, overtaken by the likes of Barclays, BTR and British Gas. The magic seems to have gone since it made its abortive tilt at ICI in 1991. As the Lex column in the Financial Times drolly remarked last month in a parody of Hanson's advertising slogan: "The company over here doing rather well over there has not been doing very well anywhere."
Bonham, who took the chief executive job in 1992 and the deputy chairmanship in 1993, is convinced he can reverse that negative sentiment. He dismisses the grudging response to the Eastern deal: "The analysts who follow us don't understand the utility industry and haven't worked out the growth potential of the unregulated side of the business." He is excited by the prospects for power generation (as distinct from the main business of distribution), gas supply and other forms of diversification. He also believes Eastern has one of the few management teams in the industry capable of delivering. "They're not dyed in the wool electricians. They're commercial people. They've been there only a short space of time. They don't have the industry's prejudices."
Loose-limbed, tall and athletic, Bonham comes across as a natural successor to Lord Hanson. With his swept-back receding hair, blue eyes and impeccably tailored suits, he even slightly resembles him. You occasionally get the impression he is impatient with all the homage paid to his boss. "I can't reinvent the past to make myself more like Lord Hanson," he says. He describes his own management style as "more congenial and less autocratic". And he rejects any suggestion that Lord White's illness might damage the company. "Putting it bluntly, I don't think we'll miss a beat."
He is also irritated by the failure of the media and the City to recognise that the old 1980s Hanson has grown up. "The market loved the gore splattered all over the papers in hostile bids. It got the adrenalin going. But it's not necessarily the way to do business." The future, he says, lies more in smaller bolt-on acquisitions and the organic growth of existing businesses.
Are we going to see Hanson bidding for any more electricity companies? Bonham, who was keen to buy the generator PowerGen from the Government in 1990, is anxious to dampen such speculation. "We're going to be relatively highly geared. We'll have our hands full for some time." But he won't rule out even the most opportunistic bid anywhere, if the price is right. Something of the old Hanson still lives.
Bonham's love of the deal can be traced back to his childhood. The son of a tenant farmer in Buckinghamshire, he had a tough upbringing. He had to work for his pocket money - paid by the hour for lugging bales, driving the combine harvester and foddering. "I earned whatever I got."
From the age of 10 he was travelling with his father to sheep sales in Scotland, where he would gaze at the auctioneers and the haggling. He and his father set up joint ventures with neighbouring farmers, buying sheep, grazing them on their land and splitting the profits.
He was sent to Bedford, the public school. "My father struggled financially to get me there. He was very hard-working and instilled some of those values into me." He studied science and was an accomplished oarsman - "much to my father's disgust; he wanted me to be a cricketer".
From school he went straight into chartered accounting, qualifying with a now-defunct London firm. After a spell with Whinney Murray (a precursor to Ernst & Young) in the Hague, he joined Staflex International, a modest textiles business, as a management accountant. "Accounting was only ever a means to an end. I always regarded myself as being commercial, not just a technician."
He joined Hanson in 1971, aged 28, filling the unglamorous post of deputy financial controller. The company then was a modest business making pre- tax profits of less than pounds 3m. "I had visions of doing four or five years there before getting what I saw as a real job in BP or ICI." Hanson's astonishing growth convinced him to stay.
Appointed finance director in 1981, he saw through all the big Hanson deals, from Ever Ready batteries and UDS stores to Imperial Tobacco and Consolidated GoldFields. He was closely associated with the fancy accounting and clever tax planning that went with them. He recruited Greg Hutchings, a former Hansonite now running his own conglomerate, Tomkins. He was lucky to get an interview, Bonham recalls. "We were looking for an accountant, but it was the enthusiasm in his application that whetted the appetite."
Inside the Hanson HQ on London's Hyde Park Corner, Bonham is well liked, though he can be irritable with anyone who is under-briefed or lacks his meticulous attention to detail. Bonham is his own man, prepared to fight his corner against Lord Hanson when necessary, says one insider. His office is a clutter of paperwork, in marked contrast to Lord Hanson, who operates a strict clean-desk policy. Bonham is fond of quoting Harold Geneen, the former AT&T boss: "A cluttered desk is a sign of genius."
He may not have the bon vivant image of Lords Hanson and White but he still lives an extravagant life, driving a blue Bentley and skiing in the chic resort of Verbier. His salary last year is thought to have been pounds 1.04m. He owns Hanson shares worth pounds 680,000 and has 1.7 million options, which currently carry a theoretical profit of pounds 640,000.
He is a Conservative supporter and a great admirer of Margaret Thatcher. The present Government's clampdown on share options was "a retrograde step", he says, but the company's annual pounds 100,000 gift to the Tories still looks safe. Withdrawing it would be sour grapes, he says. "You've got to nail your colours to the mast and be consistent." He limits his non- executive directorships to one, at the drugs group Glaxo-Wellcome.
He has two daughters from his first marriage. As for his second wife's name, it is Karen Levy. She was formerly an investor relations manager with Hanson and is now a non-executive associate director. They recently celebrated their second wedding anniversary.
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