British magnates in the fight of the year
IT’S & not quite a duel at dawn but the next best thing: A showdown in the High Court in London.
On the one side, you have the low-profile Irish property magnate Paddy McKillen; on the other, two equally reclusive but powerful figures, 77-year-old British twins, David and Frederick Barclay.
Watching nervously from the sidelines is Nama, part onlooker, part protagonist.
The IBRC, formerly Anglo Irish Bank, is also in the frame in its role as lender to the Quinlan syndicate.
Present in court, maintaining a watching brief, is the exiled property tsar Derek Quinlan; the sale of his syndication stake in the Maybourne Hotel Group has precipitated the proceedings.
This may not be a life and death situation, but there is a lot at stake: Ownership rights over London’s most prestigious set of hotel properties.
Both parties are attended by a bevy of top legal guns for hire, with the Barclay twins boasting the larger armoury of more than 30 lawyers.
Last year, the Barclays acquired the debt secured by Quinlan’s shareholding in Maybourne, pushing their stake to about 64%. On the London Monopoly board, Maybourne and its connected company, Coroin stand out, as these entities own three of the poshest hotels in London: Claridge’s, the Connaught, and the Berkeley. The group’s worth is estimated at £1bn (€1.2bn).
When the Quinlan group of investors swooped on the three hotels, along with the Savoy (later sold), in 2005, it was seen as a coming of age for our proud nation.
The Paddys from across the water had finally stormed the ramparts of up-market London.
No longer digging trenches for Murphy or McAlpine, they could now ring the bell for room service at its best.
The passing of majority ownership over the group to the Barclay twins can be regarded as a return of the natural order.
McKillen says he was unfairly shut out of the deal last autumn and argues he should have been given a chance to line up partners to mount a rival bid.
At the time, Nama, which holds the Quinlan debt, netted about €800m from the sale of the interest to the Barclay twins. This was presented by the Nama publicity machine as something of a coup for the Irish taxpayer.
However, McKillen insists the Barclays acted in concert with Quinlan to ensure they gained control of Maybourne at a bargain price. Stress is laid on the fact that Quinlan has been supported financially — maintained, in effect — by the Barclays since 2010, a fact not contested by the twins.
In other words, Nama management had been naive.
His claim that he had blue chip investors from the Gulf lined up has been mocked by counsel for the Barclays, who have sought to paint McKillen as an Irish financial “man of straw”.
Nama, meanwhile, is seeking a declaration that it operated properly when it sold on the Quinlan loans and stake to the Barclay twins.
Frank Daly and his team could be forgiven for viewing McKillen as an irritant, as the Ulsterman has already administered a cut to their lip by persuading the Supreme Court to rule on a key issue in his favour, following a legal challenge last year.
The Supreme Court held that Nama had erred in acquiring a portfolio of McKillen property loans ahead of its formal establishment.
Only time will tell whether McKillen has bitten off more than he can chew in taking on the Barclays.
However, the Belfast bantamweight has certainly shown he is up for the fight, but who exactly are the Barclays?
The pair have enjoyed a life less ordinary, even by the standards of your average self-made business magnate.
Over 50 years, they rose from near poverty to a position of enjoying an estimated wealth of over €2bn at the height of the boom.
The twins had eight siblings. Their father was a Scottish-born travelling salesman and the family lived in a house beside the railway in Hammersmith, west London.
The boys left school early to work as painters and decorators, branching out as estate agents in the 1960s.
They started to buy and fix up hotels in central London for resale, becoming owners of the landmark Lowndes Hotel.
In 1974, they almost crash landed after a property collapse in the UK.
They were forced to default on debts owed to the Crown Agents, a branch of government set up in 1833 to procure goods for the empire. Fortune smiled on them when the decision was taken not to make them bankrupt. Their debts were restructured and they were back in business.
In 1983, they paid almost £50m for Ellerman Lines, a shipping, brewing/taverns and travel company. They later sold the brewing business for £240m, using the proceeds to acquire the Ritz in Piccadilly in 1995, a hotel they still own.
They also splashed out £370m on a Bermuda-based shipping company, Gotaas-Larsen.
By then, they had picked up the scent of newsprint. Following the death of media baron and Mirror Group Newspapers owner Robert Maxwell, one of his titles, The European, came up for grabs. The Barclays snapped it up. It closed six years later, having run up heavy losses.
Undeterred, the twins snapped up The Scotsman, installing former Sunday Times editor Andrew Neil as CEO. They sold the headquarters for a hefty price and, in 2000, tried to gain control of Express Newspapers, losing out to porn magazine publisher Richard Desmond.
Four years later, they got their hands on the Telegraph Newspaper group after Conrad Black and his Hollinger empire were forced into a sale. The Barclays beat 10 other bidders, paying €665m.
Soon after, more than 100 journalists were made redundant and there followed a succession of editors. The Barclays have tended to politely insist that the “Torygraph” stick to a pro-Conservative, Eurosceptic line.
These days, Aidan Barclay, son of David, is the effective chief operations officer, but the twinsremain in charge.
Their modus operandi has been described as: Buy an overlooked company, develop the property, then break it up and realise quick profit.
They are described as “effective stealth buyers who come out of nowhere and move quickly”.
They prefer to operate without tapping the markets for finance as this limits the flow of information available to rivals, all of which makes this week’s court proceedings, and Irish-UK grudge match fascinating.
It could be some time before we know the outcome, but one thing seems clear. There are plenty of our learned friends who will be laughing all the way to the bank. Let’s hope the joke will not eventually be on Nama and the Irish taxpayer.
* Born: 1934 in London. Left school early.
* Career: Painters, and decorators. Later estate agents and owners of hotel properties.1974: Narrowly avoided bankruptcy.1983: Acquisition of Ellerman shipping, first major deal.1992: Acquired The European.1995: Purchase of The Ritz Hotel in Piccadilly.2004: Bought Telegraph Newspapers from Hollinger.2011: Acquisition of majority stake in Maybourne Group from Nama.
* Tax residence: Monte Carlo.
* Family residence: Channel Isles: A mock Gothic castle.
* Family: Both are married, David to a former model, Zoe Newton, and Frederick to a Japanese woman, Hiroko Asada.
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