Tiny Rowland’s maverick empire quietly vanishes; company has shrunk from a FTSE 100 component and symbol of buccaneering capitalism to a small Africa-focused infrastructure and agribusiness conglomerate

Last updated: May 15, 2013 7:12 pm

Tiny Rowland’s maverick empire quietly vanishes

By Kate Burgess and Anousha Sakoui

How the mighty are fallen. Lonrho, the global cars-to-crops empire built by maverick businessman Roland “Tiny” Rowland into one of the most prominent public companies of the last century, is about to vanish quietly from Britain’s stock markets. The company, which has shrunk from a FTSE 100 component and symbol of buccaneering capitalism to a small Africa-focused infrastructure and agribusiness conglomerate, has agreed to be taken private for £174.5m, about a tenth of its value in 1991. Two Swiss investors, Rainer-Marc Frey, a director of UBS and founder of hedge fund RMF, and Thomas Schmidheiny, the billionaire former chairman of Holcim, the cement maker, have offered Lonrho shareholders 10.25p a share in cash. The bid marks the end of a colourful chapter for the 100-year-old British company which was incorporated in London in 1909 as the London and Rhodesia Mining and Land Company and was to become synonymous with British capitalism in Africa.

In the second half of the 20th century it expanded globally, was dubbed “the unacceptable face of capitalism” by one British prime minister, bought the Observer newspaper and became embroiled in a long-running battle with the Fayed brothers over the takeover of Harrods.

However, the empire unravelled in the early 1990s, hit by debt and declining metal prices, and in 1993 its controversial boss, who claimed numbers of African despots as friends, was ousted. By the turn of the millennium, two years after Rowland’s death, the conglomerate had been broken up and the mining business split off to become Lonmin.

By 2005, when all that was left was the name and a hotel in Mozambique, some investors banded together to resurrect Lonrho’s legacy in Africa, focusing on the continent’s economic development, providing infrastructure and shipping fish and fruit around the world.

However, Lonrho has struggled to make a profit in its new form and turned to investors for cash again and again. Last year, the board outlined a new strategy to build margins but in February it issued a profit warning after project delays and failing to deliver hake loins of the quality required by its US customers. In March it reported a £7.7m operating loss for 2012 and a rise in net debt to £99.1m.

The company said on Wednesday its new strategy was taking longer to complete than expected and there was an “ongoing requirement to invest in the businesses”.

Mr Schmidheiny said: “We believe Lonrho has strong long-term prospects, but the significant capital required to grow the business over time is evident.”

At 10.25p per share, the offer represents a 97 per cent premium to Tuesday’s closing price of 5.2p and a 38 per cent premium to the six-month average share price of 7.42p. The shares closed at 9.9p, a little below the offer price and well below their peak of more than 30p five years ago. The deal is expected to close by November.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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