COLUMN

The $1.2-million sales pitch

Diane Francis June 29 1987
COLUMN

The $1.2-million sales pitch

Diane Francis June 29 1987

The $1.2-million sales pitch

COLUMN

Diane Francis

It was a shameless corporate junket: a $1.2-million grand tour of distillery operations in four countries for about 90 people via the Concorde supersonic jet. For six days earlier this month, the booze cruise was laid on by British food conglomerate Allied-Lyons PLC to highlight its 51-per-cent stake in Canadian multinational distillery giant Hiram Walker-Gooderham & Worts Ltd. The grand tour of Canada and Hiram’s corporate colonies—Britain, France and the United States—was for the benefit of some of Britain’s most influential investors and brokers, who think of Canada, if they think of it at all, merely as a nice place to hunt and fish and ski. Not a place where great multinationals grow. “Canada is a fairly boring place,” analyst Peter Temple of London brokerage firm Hoare, Govett Ltd. told Maclean’s. “Too much land and too few people.”

Such brutal opinions belie the fact that the British still suffer from mental myopia when it comes to recognizing that even a society where people are crass enough to drink tea out of Styrofoam cups may have merit. In short, some remain snobs, a situation worsened by the fact that Britain leads the pack in economic growth for the first time in many years. But the sheer extravagance of the tour attracted Britain’s financial musclebrokers who had never been to Canada and never heard of Hiram Walker until last year, when Allied took control of the troubled company. And Allied’s clever empire-builders—who own 7,000 pubs and make, among other things, Tetley tea and Teacher’s scotch—had more reasons than just celebration for this road show.

The tour of Hiram’s holdings was a great success and everyone had a jolly good time, even though Allied’s chief strategist and chairman, Sir Derrick Holden-Brown, laughingly said that he “took a bit of stick” over the extravagance of using shareholders’ money at a rate of more than $13,000 per head to wine and dine brokers and the press. But this was British canniness at its best, the kind of posh flamboyance that most Canadian multinationals would be well advised to emulate.

The tour’s first stop was in Dumbarton, Scotland, where Ballantine’s scotch is blended and bottled across from a castle along the scenic Clyde River. It ended six days, five hotels

and four countries later at Courvoisier’s cognac distillery in hilly southern France. Along the way, through Toronto, Windsor and New York City, in sessions on the making of Canadian Club, Kahlua, Tia Maria and a host of other liquors, the analysts and investors were bombarded with facts and figures in slick, formal presentations. The lectures were punctuated by free samples and lavish meals. “It is our duty to do our market research,” suggested influential beverage analyst Victor MacColl of Kleinwort Grieveson Securities Ltd. in London.

At the end of the tour, he and other important analysts were significantly impressed with Hiram’s operations— enough to increase their estimates of Allied’s 1987 pretax profits to close to $1 billion from around $875 million—a shot in the arm for Allied shares. But it wasn’t all work. Outside of the official itinerary, there was the token

Allied— whose many products include Tetley tea — had more reasons than just celebration for its extravagant junket

tourist trip to the top of Toronto’s CN Tower and a late-night visit to a raunchy Windsor strip club called Jason’s (“the only place where all the vital statistics were laid bare,” according to one wag).

Allied became involved with Hiram Walker when it made a deal with the company’s management to buy the distillery for $2.6 billion—out from under a $3-billion bid by Toronto’s Reichmann brothers for Hiram Walker’s parent company, Hiram Walker Resources Ltd. The parent company included Consumers’ Gas, Home Oil and Interprovincial Pipe Line. After a war of writs and words, the Reichmanns capitulated and agreed to accept 49 per cent of the distillery to Allied’s 51 per cent. But according to the deal, the Reichmanns can opt out or be bought out by Allied, with three months’ notice, on Dec. 8,1988. This tour probably signals that Allied is girding itself to do just that.

While Hiram was a surprise to Britons who had never heard of it, Allied’s Sir Derrick certainly was familiar with its operations. A ruddy-cheeked,

canny confidant of Prime Minister Margaret Thatcher, Sir Derrick was a Hiram Walker representative in Britain between 1949 and 1954. His wife of 37 years, formerly Patricia Mackenzie, is from Toronto, and Sir Derrick served as a patrol boat commander during the war, with Canadians including Vancouver lawyer Thomas Ladner, now on Hiram’s board. Significantly, Sir Derrick just appointed Canadian scion Clifford Hatch Jr., whose family has run Hiram for decades, to be finance director for Allied-Lyons itself. That was an unorthodox and prestigious appointment, normally occupied by a chartered accountant and denizen of The City, as London’s financial district is called. To astute observers, it signals that Hatch is definitely in the running as a future chairman of Allied’s global empire. Sir Derrick is coy about such speculation. “It’s early,” he said, “but you can be sure at the age of 45, being brought right into the middle of Allied-Lyon House, he is certainly entitled to look ahead.”

Ironically, Hiram’s capture has its roots in the ill-fated National Energy Program, which was authored in part by a Reichmann executive, former deputy energy minister Mickey Cohen. Hiram was a great multinational until 1981, when it got caught up in the oil fever, paying $737 million for U.S. oil and gas assets that were actually worth only half that. The blunder made management gun-shy, leading it to clean up debts, end acquisitions, tighten reinvestment and sow the seeds for its own capture as shares slumped to bargain prices.

The road show was designed to push up Allied’s share-price value on the strength of Hiram’s holdings, making it easier for Allied to finance a buy-out of the Reichmanns’ shares if it chooses. Last week Allied also announced that it will seek a listing on the Toronto Stock Exchange and sell $150 million worth of shares directly to Canadians. There is little doubt that Canadians will eagerly snap up Allied stock, another step in Sir Derrick’s long-term strategy of giving Allied the means to replace the Reichmanns with other Canadian investors or make other acquisitions. As industry observer Peter Temple said, “Logic is, if Hiram is as good as Allied says, it will want it all at the nearest moment. Part of this whole exercise is to get the stock up. In the long run it will work. Hiram was badly managed, but it is a good asset.”