Stephen Catto was a paradoxical figure. By birth, appearance and attitude he was the very model of an old-fashioned City banker, indeed was described by one observer as a "gentle, straightforward and approachable grandee of the old school" – hence the legendary headline, "Catto lies doggo", which was ever-available in financial newsrooms.
Stephen Gordon Catto, banker and businessman: born 14 January 1923; director, Morgan Grenfell & Co 1957-73, chief executive 1973-74, chairman 1973-79; succeeded 1959 as second Baron Catto; director, News International 1969-96; chairman, Yule Catto & Co 1971-2001; married 1948 Josephine Innes (née Packer; two sons, two daughters; marriage dissolved 1965), 1966 Margaret Forrest (died 1998; one son, one daughter), 2001 Diana Clifford-Turner; died 3 September 2001.
Stephen Catto was a paradoxical figure. By birth, appearance and attitude he was the very model of an old-fashioned City banker, indeed was described by one observer as a "gentle, straightforward and approachable grandee of the old school" – hence the legendary headline, "Catto lies doggo", which was ever-available in financial newsrooms. Yet his career showed all the attributes of a daring financier, willing to test the limits of prevailing codes of behaviour. In the late 1960s he became a close associate of Rupert Murdoch and in the 1980s the bank Catto headed, Morgan Grenfell, was deeply involved in the so-called "Guinness affair".
Catto's father, an international businessman from Aberdeen, had been made a baronet in 1921 after playing an important role in buying food and munitions during the First World War and was ennobled in 1936. In 1944, after spending the war years advising the Treasury, he was appointed Governor of the Bank of England. His son was always loyal to his father's memory. Indeed, when Gordon Brown returned control over bank rates to a committee sitting in the Bank, he wrote a letter to The Times saying that his father "would have welcomed the proposal that the right place for control of interest rates is in an independent central bank".
In 1943, after education at Eton and Trinity College, Cambridge, Stephen Catto served for four years in the RAF, and remained attached to the service, later becoming chairman of the RAF Benevolent Fund. His other charitable work included his role as chairman of the Westminster Abbey Trust for nearly a quarter of a century until he retired in 1997. In that role he was involved in raising the £25m required for the abbey's restoration.
On leaving the RAF in 1947 Catto's first intention was to join the family firm, Yule Catto, of which, indeed, he became chairman in 1971. In this role Catto showed his solid but forward-looking capacities as a businessman, transforming Catto from an old-fashioned trading house specialising in the ever-diminishing trade between Britain and the Indian sub-continent into a widely diversified international chemicals business.
But he was far better known for the role he played in the 40 years he spent working for Morgan Grenfell, which he joined in 1957. He started in the humble job of writing up accounts in long-hand. Catto soon became a member of a group of impatient younger executives determined to modernise what was a stuffy institution even by the antediluvian standards of the 1950s.
Despite some opposition he was made a director in 1957 at the then unprecedentedly young age of 34. Two years later he succeeded as second Baron Catto when his father died. That same year Catto first showed his willingness to work with non- establishment figures when he joined the board of Arnold Weinstock's GEC and remained there during the group's major takeover bids in the 1960s, retiring only in 1993 on his 70th birthday.
In the 1960s he was sent on a number of secondments. One was to the original parent bank, J.P. Morgan in New York. In the late 1970s Catto tried, unsuccessfully, to forge much closer links with the bank, which would have led to a takeover. His long association with Rupert Murdoch began after Catto had been seconded to the bank's Australian affiliate in the mid-1960s.
The young Australian told Catto that his ambition was to buy the Daily Mirror. Told that Cecil Harmsworth King, whose group, IPC, owned the paper, would never sell, Murdoch, then the owner of a mere handful of relatively minor Australian papers, promptly suggested a bid for the much bigger IPC. Catto allegedly found the idea "slightly mad" and asked for some money to start buying shares. Murdoch immediately transferred £2m to Morgan Grenfell and Catto began to buy shares in IPC.
Events moved swiftly – albeit in a different direction. In early October 1968 Catto learnt that Professor Derek Jackson, owner of a 25 per cent stake in the News of the World, had sold his shares to Robert Maxwell, who was preparing a full bid. Catto tracked Murdoch down at a racecourse and together they agreed to make a counter-offer, supposedly as a "white knight" supporting the existing management. This was headed by a dictatorial drunk, Sir William Carr, who was persuaded of Murdoch's benevolent intentions and backed him in an effort to stave off Maxwell's bid.
The battle between Murdoch and Maxwell was ferocious. Indeed the rivals' efforts to persuade shareholders to sell to them stretched City conventions to the limit, and beyond, and was responsible for the subsequent formation of the City Takeover Panel to try and prevent such anarchy in the future. Catto and Murdoch won after a stormy shareholders' meeting, and Carr was promptly deposed. Murdoch was grateful and Catto remained a director of his holding company News International from 1969 and, later, of Times Newspapers until he retired in 1996 at the age of 73.
Murdoch said that he would "always remember with gratitude and affection what an indispensable guide he was as we took our first steps into the British market" describing Catto as "a good friend and a wise adviser both to me and to News International over more than 30 years".
Less happy was Morgan Grenfell's venture into financing feature films, an industry which has almost invariably proved a minefield for merchant banks. Films in which the bank became involved included a version of D.H. Lawrence's novel The Virgin and the Gypsy (1970) and a western, Shalako (1968). The bank's losses were substantial enough for it to be called in "for a chat" with the Bank of England, a major rebuke in those more informal times.
In 1973 Catto was appointed chief executive of the bank, becoming chairman the next year and chairman of the holding company in 1980. In the boom times of the 1980s Morgan Grenfell became notorious as one of the most aggressive banks in an era when aggression, like greed, was considered "good", employing a group of young Turks who stretched the rules even further than Catto had done when acting for Murdoch 17 years earlier.
Not surprisingly the bank became deeply involved as advisers to Ernest Saunders of Guinness when it bid for the Scottish Distillers Company. The dubious shenanigans involved led to what became known as the "Guinness affair" and the imprisonment of four of those involved. Although Catto was not personally involved, the bank had lost substantial sums in supporting its client's bid and he was elevated to the honorary role of president at the insistence of the then Chancellor, Nigel Lawson. The affair led to the takeover of the bank by the German Deutsche Bank, the first of a number of takeovers which was to lead to the disappearance of the independent merchant-banking sector in the following decade.
Catto's last public appearance came in 1999 when he took his seat in the House of Lords for the first time. After insisting that he considered it "morally wrong, purely from accident of birth, to presume to become a member of a legislative body", he went on to support "a bicameral system with a small number of representative peers included to maintain and support the monarchy and the great traditions of our country". Catto then put himself up, unsuccessfully, for election as a cross-bench representative peer.
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