Profile: Tim Waterstone - A battle of heart and head

If he had his way, WH Smith would never look the same again. By Chris Blackhurst
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The Independent Online
Funny man, Tim Waterstone.

He professes to feeling uncomfortable in large corporations but has just launched a pounds 1.17bn bid to run one of the largest of them all, WH Smith.

He cannot abide the pain suffered by children on the divorce of their parents, yet Waterstone, the father of eight children, is now on his third marriage.

He does not like the way in which a City takeover contest becomes mired in personalities, but lets slip he has been poring over Who's Who, studying his opponents' entries. (Already, he announces with relish, he has found one ex-colleague who has failed to list a marriage.)

In his spare time he has written three novels, and has a deal to write six more, one a year. He cannot stand bad reviews of his own work, yet when he ran his Waterstone's bookshops he specialised in putting a lucky chosen few authors on a higher pedestal than others, using them for the chain's book-of-the-month promotion and, doubtless, causing distress to those excluded.

He sees himself as a great patron of the struggling writer but did not hesitate in closing down Waterstone's publishing arm when it failed to make money - firing staff, returning manuscripts and scrapping commissions.

There are a lot of "buts" and "yets" about Tim Waterstone. Perhaps too many for the strait-laced, still deeply conservative City, now deciding whether to support him in his tilt for WH Smith. He does not fit into any neatly defined pigeonhole: a 58 year old whose wife, Rosie, a television director, is younger than his oldest son; a multimillionaire who is an avowed Labour supporter; a hard-nosed businessman who, when the going gets tough, will turn to prayer; a high Anglican who admits to always having wanted to be Jewish.

And on it goes. Almost everywhere you look in his life, there is a flip side. In 1992 he said he was bored with the British book trade and was leaving it. Here he is, five years later, wanting to come back and manage the biggest player in the industry.

In a deal that was billed as a "merger" he sold his chain to WH Smith for pounds 42m, of which pounds 10m was for him personally. While some staff were furious at what they saw as a betrayal of Waterstone's learned, high quality values, their boss justified the sale on the ground that his company was steeped in debt and the high street looked perilous. Oddly, here he is again, in 1997, piling up the debt to takeover W H Smith. There was a personal get-out for Waterstone, allowing him to collect his money, write novels and launch Daisy and Tom, an upmarket chain for children selling books, clothes and toys.

It's the ever-present contrasts within Waterstone - a restless struggle between heart and head, excited one minute, bored the next - that can be so disconcerting.

WHEN his bid for WH Smith was announced last week, reaction was mixed. From WH Smith there was nothing except hostility. Despite their deal a few years ago, there is a long-standing animus between the group and Waterstone, which stems from the period before he founded his own company and worked for them in the US. He was charged with setting up a US bookselling division, failed miserably, and was fired. That was in 1981. He went on to form a successful business in Britain, and the sniping between the two has never gone away.

From the City, last week, there was a feeling of relief that at last WH Smith, for so long a lacklustre group going nowhere, might at least be put into play - that if not Waterstone, then someone else.

There was also a sense of incredulity, that after all the harsh lessons of the bull market of the late 1980s - when ambitious entrepreneurs goaded on by their advisers amassed huge piles of debt in order to strike at other companies, only to come a spectacular cropper - here was somebody trying the same tactic. If Waterstone's attempt is successful he will be left with a troubled retail group carrying enormous borrowings.

While some analysts questioned how he could make it pay, others were more positive. WH Smith, they reasoned, is in such a mess that a decent manager like Waterstone could soon improve profits.

Away from the City, in the books trade, there was soul-searching. Within the industry Waterstone is admired as someone who transformed bookselling, who persuaded customers to buy three books instead of one. And he is also loathed as the architect of the demise of the small independent bookshop, as Waterstone's stores swamped everything else around them.

A revamped WH Smith selling more books, as Waterstone promises it will, might be good news for consumers. But for bookshop owners in towns spared a larger Waterstone's or Dillons - and doing quite nicely, thank you, from WH Smith's decision a few years ago to scale back its number of titles - it could be bad.

TO ADD to the embattled independents' woes, Waterstone's bid comes just at the moment that two giant US booksellers have announced intentions to set up in Britain. Borders and Barnes & Noble are both bringing US- style book superstores complete with coffee bars and lounges to this country. At the same time, Waterstone's, now part of WH Smith, has opened a superstore in Glasgow, a development its founder applauds.

If he buys WH Smith, says Waterstone, one of his first acts will be to "rush to complete Waterstone's big store opening plans quickly."

His enthusiasm for getting his hands back on his old chain could be seen as evidence that he is only interested in Waterstone's, that once he takes control of WH Smith, he will sell off the rest of the business and retain his bookshops. Not true, he says. He wants to run the whole WH Smith business, to ensure that all 560 outlets focus on three areas: books, newspapers and magazines, and stationery.

This capitalist in what was, until he came along, a distinctly non-capitalist business, is sitting in an adviser's City office, planning his next move. Again, more inconsistencies. He is surrounded by sharp-suited people, proud of their aggression. He, on the other hand, seems apologetic, embarrassed almost. They are loud, he is softly spoken.

They are moved by deals, he is close to tears when talking about how in one of his novels he describes the autobiographical anguish of telling a young child that her parents are parting.

It is all slightly surreal. He is proposing to spend over pounds 1bn, yet he lacks boldness. He flashes a bid document, code-named Cairo. When asked why Cairo, he struggles for an answer. Was it the romantic in him, likening the current hotch-potch that is WH Smith to a Middle Eastern bazaar? He shrugs. The name was dreamt up by his advisers and had nothing to do with Waterstone the book-selling novelist.

He wants to return WH Smith to his childhood, to a shop in his local village in East Sussex which was warm and welcoming, and sold books, newspapers, pens and paper. The shop loaned books as well - something he draws the line at.

Waterstone went to school at Tonbridge and university at Cambridge, where he read English. He drifted for a while, working for his father's tea-broking business in India. He joined Allied Breweries as a trainee in 1964, working for Sir Derrick Holden-Brown, who "taught me everything I would ever need to know about boldness, the need for numeracy, and drive".

After nine years at Allied, Waterstone decided to move on. He would later recall that he found it increasingly difficult to square selling alcohol with his religious beliefs; Sir Derrick remembered the declared reason as Waterstone's desire to join WH Smith.

Oddly for someone who now says WH Smith were never happy with him, or him with them, he stayed eight years. Then they sacked him and he started out on his own. He likes to say it was a vision thing, that the idea for the stores came from inside his head. But then he admits to mimicking the US example of large, downtown bookshops, open all hours, with room to browse and a large selection of books on everything.

Waterstone formed a chain that he boasts serves only 17 per cent of the population. "It is a tiny proportion. They feel comfy with Waterstone's, it is their shop," he says.

Now he wants to manage a group that serves everyone. He met Bill Cockburn, the recently departed chief of WH Smith, and they got on. Mr Cockburn, a former head of the Post Office (his presence might explain why WH Smith so closely resembles a branch of the Post Office, all steel and drab carpet) did some good things but, maintains Waterstone, he had "no vision of how to take the group forward, he had no creative sense of how to do it".

Waterstone, of course, has that vision. "Bookselling is all about the backlist not the frontlist," he says. In the branch of Waterstone's in Notting Hill, west London, they sell one copy of the Koran each year. That, he says, is the "mark of a proper bookshop. It is not afraid to stock a slow-selling back inventory." It does not cost much, stocking a few copies of the Koran, but in its main high-street branches WH Smith has gone the other route, selling only the most popular titles.

Similarly, for newspapers and magazines. Waterstone, if successful, will sell more foreign-language titles. He will sell every computer magazine available. And, he claims, "Nobody is doing stationery well. Bits and pieces are being done but that is all. The margins in stationery are wonderful."

The quality of staff will be improved: more graduates, greater incentives. It all adds up to a package that the City might find hard to resist. If he gets the nod, he might stay at WH Smith this time. But few would bet on it.