Sir James Goldsmith clearly loves taking a gamble almost as much as he loves making money. Now worth an estimated $1.4 billion, the legendary Anglo-French corporate raider was just six years old when he made his first big win at a casino slot machine. And, when his first son was about to be born in 1959, Goldsmith, then penniless, rented a private room at the best clinic in Paris and paid for it by winning a backgammon game at the Travellers Club on the Champs Elysées. Since then, the six-foot, four-inch buccaneer’s daredevil business style and colorful personal life have made him one of Britain’s richest and most well-known financiers. But, with his audacious $25.8-billion bid last week to take over BAT Industries PLC, one of Britain’s largest companies, Goldsmith is taking his biggest gamble yet.
If successful, the bid by the 56year-old Goldsmith, merchant banker Jacob Rothschild and Australian media magnate Kerry Packer would be the largest takeover in European history.
But BAT, whose far-flung international tobacco and financial service operations include 40 per cent of Montreal-based Imasco Ltd., has spurned the offer. And analysts say that Goldsmith and his allies may have to bid more—perhaps even topping the record $30 billion that investment banker Kohlberg, Kravis, Roberts & Co. spent last year on RJR Nabisco Ltd.
Still, it is not just the sheer size of the deal that has shaken the British financial world. Goldsmith’s bold move represents the first time the aggressive buy-out strategies that have reshaped American finance have been unleashed on European business. Lacking the sophisticated defensive tools that have emerged in the United States, members of the European financial community fear their world may never be the same.
Goldsmith plans to use high-yield, high-risk so-called junk bonds to fund the takeover. If successful, he says that he plans to dismember BAT—a company that in recent years has made its own mark as a corporate predator—keeping the lucrative tobacco operations and selling off the rest of its assets. For his part, Patrick Sheehy, the tough, straight-laced BAT chairman rejected the offer outright, calling it “an
ill-conceived attempt at destructive financial engineering.” Even so, the mere possibility that Goldsmith’s bid might spawn other leveraged buy-outs sent the London Stock Exchange soaring to a post-1987 crash high, with
the Financial Times stock _
index hitting 2,250.9.
In Canada, meanwhile, speculation that BAT affiliate Imasco may soon be on the auction block pushed the price of shares in the tobacco, retail and financial services giant to $39.37 at week’s end from $33.75 on July 11. With an estimated break-up value of $6.8 billion, Imasco is Canada’s 19th-largest company, based on 1988 revenues.
And, its holdings include Imperial Tobacco Ltd., Shoppers Drug Mart Ltd. and Canada Trustco Mortgage Co.
Colin Brown, an analyst with Toronto-based Deacon Morgan McEwen Easson Ltd., said that if Goldsmith succeeds in buying out BAT, he would probably buy the remaining 60 per cent of Imasco’s shares. Brown said that the British-based raider would then likely turn around and sell off all of Imasco’s holdings except for Imperial, which controls 56 per cent of Canada’s cigarette market. Industry observers say that finding Canadian buyers with the cash to purchase all or part of Imasco’s non-tobacco assets should not be a problem. Among the potential purchasers that Bay Street analysts most often mentioned last week was Montreal-based financier Paul Desmarais. Power Corp., the conglomerate he controls, pocketed $1.25 billion after selling its stake in newsprint producer Consolidated-Bathurst Inc. to Chicago-based Stone Container Corp. earlier this year.
Taking a run at Britain’s thirdlargest industrial company is a fitting way for Goldsmith to return to his native shores. With a taste for right-wing politics as well as the gaming tables, Goldsmith is as well-known for his playboy lifestyle as for his corporate forays. Since the day he eloped with the heiress to a Bolivian tin fortune in the 1950s, his love life has fuelled countless gossip columns. In fact, only two years ago Goldsmith had his exg wife and a mistress lodged in 2 opposite wings of his Paris mansion, while his legal wife lived in a E London Georgian mansion. And, I throughout the early 1980s, he I was locked in a feud with the satirical British biweekly Private Eye over allegations about his private and business life. The feud culminated in a libel action in which Goldsmith was successful.
When it comes to business, he is equally energetic. In Britain, he built a small British pharmaceutical company into the huge Caven-
_ ham Foods conglomerate. Then,
in 1973, he invaded the United States where, over the next 16 years, he launched a series of corporate raids.
But he had the wisdom to sell all his U.S. stock holdings before the 1987 stock market crash. And earlier this year, he announced that he was returning to Britain in search of new takeover targets. True to his word, Goldsmith, the consummate gambler, is now after his biggest pot ever.
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