LORD OF THE RAY

Ian Brown April 30 1979

LORD OF THE RAY

Ian Brown April 30 1979

LORD OF THE RAY

Ian Brown

She has craven eyes and haunches that could start a fire and it is all Ken Thomson can do to take his eyes off her. Lingering, re-establishing her form in his memory, he prys his eyes from the tiny ivory figurine’s Renaissance lines and prepares to re-enter reality. “Try not to make it seem that I love only art, and not the thrill of business,” he says almost wistfully, double-locking the door to the office gallery, bricked in Krieghoffs, which houses half his priceless collection of bronzes and boxwood and ivory carvings. “Because I do. It’s just that when someone mentions art, they really get me going.”

Until recently, Ken Thomson seemed the most reluctant businessman, more curator than capitalist, an heir who, for duty’s sake, wouldn’t step out of the way of his famous father’s barrelling empire—the legacy of Roy Thomson. “When he started out as the next Lord Thomson in training,” a member of the family says of Ken, “he was quite reluctant. Either it took a long time for it to take hold, or it took a long time for him to decide it wasn’t that unpleasant.” Last week, as he swapped $641 million for 75 per cent of the Hudson’s Bay Co. and put to an end an historic proxy war between himself and Galen Weston, 55-year-old Kenneth R. Thomson, second Lord Thomson of Fleet and of Northbridge in the City of Edinburgh, devoted father, husband and art collector, put the myth of his reluctance permanently to rest. In one artful, 48day pirouette, Thomson and John Tory, his good friend and top financial adviser, had moved themselves to the top of Canada’s corporate class.

When you are worth close to $1 billion, reality comes with a different set of rules: your mission, whether or not you accept it, is not the impossi-

ble task of spending it all, but of giving the fortune a life of its own. That is why Garfield Weston’s millions are ultimately controlled by a charitable foundation, and it is what Ken Thomson and John Tory have been doing since Roy began handing them the reins of his empire in the mid-1960s. While Tory manages four of the five private firms through which the entire sway is ruled, Ken thinks, plans and—in between adamantly not smoking and placing the occasional $50,000 order for German wine—supplies the cash for life.

Which raises the ultimate question: is Tory the brains behind the toff, investing as he can at will? Certainly not, Tory insists: “I’m in sort of a unique position. You see, I’m the president of a

number of family holding companies. Those families don’t run anything, and so I don’t run anything. But because I represent the major shareholder in these companies I get involved in the corporate planning, the acquisitions, financings.” Thomson readily admits Tory is the “expert in corporate affairs.” Thomson sits on the boards of Abitibi Paper and the Toronto-Dominion Bank compared to Tory’s eight nonThomson directorships. But Ken Thomson need only be clever enough to hire the best advice available. As one corporate underwriter puts it, “There are probably only about 10 people in Toronto who are truly brilliant. Where Thomson has been clever is that John Tory’s probably one of them.”

The subject of Tory and Thomson’s desires is a huge international and (for the most part) privately owned financial empire with more than 25,000 employees and operations everywhere from Leamington, Ontario, to Lebanon. At its spiritual heart are the North American Thomson community newspapers: 117 unexceptional but highly profitable ($56 million last year) rags that gave many journalists their first job and Roy a reputation as the nicest tightwad around: in 1961 he was paying some reporters what he had earned in 1929—$25 a week—and he rationed carbon paper. Across the Atlantic is a morass of travel and publishing companies and more than 50 newspapers, including The Scotsman in Edinburgh and the still-struck London Times and Sunday Times. Rounding the empire off is a host of lesser known entities: Scottish &

York Insurance, Dominion-Consolidated Truck Lines, real estate holdings in S.B. McLaughlin, cable television interests and some 400 subsidiaries littered across the globe.

Its core, however, is black with North Sea oil. Picked up in 1971 when Jean Paul Getty, a much richer man, wanted the publisher of The Times around while the British government allotted drilling rights to Americans, the Thomson family’s interest in the Piper and Claymore oil fields in the North Sea amount to a 20-per-cent slice of 32 wells producing an incredible third of all the oil coming from under its choppy surface: some $500 million in income over the next five years. The cash that for 40 years of Roy’s life had been turned back into the family companies finally started to flow exponentially last year—much to the relief of Thomson executives in Canada and Roy’s nine heirs, linked as they are to an endless chain of 80-year trusts that begin to leak inheritance money once the heirs turn 30. A relation of Ken’s remembers a time 15 years ago—this of a man who once spent £38,000, £28,000 more than he’d expected to, on a sculpture the Metropolitan Museum of Art wanted for itself—when Ken Thomson couldn’t find $10,000 in quick cash to buy two Krieghoffs going at a bargain.

But with the North Sea money have come serious doubts about the British

economy. Members of the family who have been asked to invest in the Ranger oilfield have turned their suitors down. Britannia Airways, a charter travel subsidiary, has begun buying airplanes, rather than leasing them, as a hedge against the threat of nationalization. Tory and Thomson, disturbed at the intransigence of the printing unions whose demands have held up publication of The Times since Nov. 30 of last year, are seriously considering, family members say, the option of printing The Times in Germany or Switzerland, from where it would be shipped each morning. The international centre of the Thomson empire came back to Toronto last fall, and the last shares of Scottish Television, Roy’s “licence to print money,” were disposed of more than a year ago largely because the government’s interference had become a pain. As oil dollars flooded everywhere, John Tory began looking for a hotel for the family fortunes, a living, pulsing pension plan. The Bay—well managed,

widely held, under-priced and richhad been glomming around as a possibility since Roy Thomson first eyed it through multiple lenses in the early 1970s. With Bay President Don McGiverin driving, it would be the perfect long-term investment vehicle: it would appeal to Ken’s sense of history (as does his manorial Rosedale, Toronto, home, where he lives with his wife, Marilyn, and two of their three children) and it would suit the discreet Tory/Thomson management style. Get control of a strong company and stay out of its affairs, Roy had always told them. “In a way,” a relation remarks, “Grandad is still there. Because they still operate the way he set them up.”

So that by the time Thomson and Tory decided to make a run at the Bay, they were determined to get it. Their initial bid of $31 a share for an important 51 per cent of the Bay’s stock seemed generous to the institutions which control 60 per cent of

the Bay’s shares. But the Bay’s directors had barely rejected Thomson’s bid as hopelessly low when food king Galen Weston entered his own: $40 a share payable in cash and newly created shares of George Weston Ltd. Though the value of the shares was difficult to assess, fickle Bay Street analysts immediately dismissed Thomson’s bid. But they underestimated Ken Thomson’s fortunes and, more importantly, John Tory’s shrewdness. April 2, Tory shelled out another $3,000 for stamps and mailed shareholders an amendment to the Thomson offer: $35 a share for 60 per cent of the company with one ultimately crucial proviso—the Thomson offer was now unconditional, and would take up any number of shares tendered up to 60 per cent. Very few knew it, but John Tory had already won.

Weston’s lawyers suspected as much. Screaming foul to the Ontario Securities Commission, the august body meant to referee take-over games, Weston’s lawyer insisted Tory’s offer on Thomson’s behalf was a new one, and that its closing date should therefore be extended by three weeks—thereby giving Weston’s bid the early closing advantage. “The only thing they didn’t change was the Thomson name and the target company,” complained Chisholm Lyons, Weston’s senior lawyer. But a member of Weston’s board tells a different, more desperate story: “We knew

we couldn’t make our offer unconditional,” for as Galen Weston explains, “we only go for control.”

Deluged with calls from confused investors—should they tender to Thomson for cash now, or pass up the opportunity for (maybe) more Weston cash later?—the OSC called an informal meeting April 3 and Weston went in fighting. The firm desperately needed time—time to convince shareholders that its was the better offer, that 51 per cent of the shares would be tendered. Seven hours later, a saw-off was arranged: Weston would stop jabbing at the Thomson offer and Thomson’s would extend its closing date by three

days to give shareholders enough time to consider both offers.

The Weston team flew into action. Working with a seven-man executive group from stockbrokers Burns, Fry Ltd. and a sales force of 100, it hit upon what Lyons calls, “in all modesty, a brilliant response.” “Very imaginative,” Bay President Don McGiverin concurred. Under an unprecedented escrow agreement, Bay shares could be deposited with the Canada Trust Co. and, if at least 45 per cent of the shares had been deposited the evening before the Thomson offer expired, Weston’s would guarantee its offer.

But again it had underestimated John

Tory. Armed with twin brother Jim and partner Gar Pink from the family law firm Tory, Tory, DesLauriers & Binnington, it was his turn to cry wolf: the escrow agreement, if it was legal at all, had not been disclosed to the retail shareholders. Sunday, April 8, Weston’s lawyers having worked through the previous night to prepare a 10-page argument in defence of their beloved escrow agreement, the OSC met again.

The outcome never mattered. Just as the meeting started—a little trick of timing his brother had picked up during Simpsons’ unsuccessful self-defence against the Bay last December—Tory announced a better Thomson offer. He now wanted 75 per cent of the Bay, and he was willing to pay $37 a share for it— $641 million, some $276 million more than Ken Thomson originally intended. Once again, business had imitated art. The Bay’s directors, meeting late in the afternoon, couldn’t refuse Tory’s new plan: tendering their own shares (which will net George Richardson, the governor, a pleasant $20-million profit), they recommended their shareholders do the same. For the first time since he left Eaton’s in 1969 to escape that dynasty’s domination, Don McGiverin had a boss. At the time, it is not unlikely that Ken Thomson’s mind had wandered back to his lovely statuette. “I think,” he says less wistfully, “that it pays to put your money where your heart is.”