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28 March 2004
Scotland on Sunday
The Big Dealers

THERE have been some rousing performances at Glasgow's Royal Concert Hall, from the music of Mozart to the political musings of Michael Portillo. Tomorrow it will be the turn of Britain's fastest self-made billionaire to raise the tempo, and the audience could be in for a colourful evening.

Philip Green, the so-called King of the High Street, rolls into town to provide his own style of retail therapy to a hall full of Scottish entrepreneurs.

Rarely will so much personal wealth be gathered in one room and among them will be a select few, once referred to as the Friends of Philip, a close association of like-minded individuals who not only party together but have been working on deals that have changed the ownership structure of the British high street.

They include Tom Hunter, one of Scotland's richest men and host of tomorrow evening's bash, and Peter Cummings, managing director of integrated finance at Bank of Scotland. Latterly they have been joined by the reclusive billionaire Reuben brothers and together they are behind a series of deals and potential deals over the last two to three years in excess of GBP 12bn. Collectively, they have transformed Bhs, Arcadia - the Top Shop to Dorothy Perkins empire - and bought up properties including business parks, pubs and small retail chains. They worked on attempts to buy Selfridges, Allders and House of Fraser, and the very mention of their interest is enough to start a City stampede.

Green is the central figure, advising, negotiating or investing, but always on the lookout for the next big trophy. While Hunter is mentor to many of Scotland's entrepreneurs, Green is Hunter's mentor, the man he regards as his own guiding light. They consult regularly, meet occasionally, and drop large dollops of cash into each other's latest projects.

When the young Hunter, then running the Sports Division chain in Scotland, attempted to buy the Olympus sportswear shops from Sears, the board told him they did not think he could raise the money. More to the point, he was a bit of an unknown, the owner of a modest retail operation based in the west of Scotland.

Green, though not universally admired, but well known and experienced, stepped in and negotiated the deal, snapping up Olympus for a bargain and setting up Hunter as an A-list retailer. They have kept in touch ever since, tipping off each other about deals coming up, holding stakes in each other's investments and enjoying the Riviera lifestyle expected of the mega-rich.

Green was a guest at Hunter's 40th birthday bash, hosted by Jonathan Ross on a yacht in Monaco, and Hunter was among those who celebrated Green's 50th a year later in the same location. Both were lavish affairs, Green's marginally the more eccentric where the partygoers wore Roman togas. Hunter was serenaded by his pop idol, Stevie Wonder, while Green's wife, Tina, hired Tom Jones, Demis Roussos and Michael Aspel to entertain her husband's guests.

The tycoons talk frequently, and meet at Formula One race meetings and at luxury sunshine destinations. But it is their meetings to discuss their latest dealings that excite them the most. Green's ambitions are seemingly limitless. With financial assistance from Cummings and support from the Barclay brothers, owners of The Scotsman Publications, he bought struggling Bhs for GBP 200m and turned it into a GBP 1bn success, bringing in Hunter as a 5 per cent shareholder. He expressed an interest in both Safeway - but was beaten to it by William Morrison - and the GBP 2.5bn pub estate which was put on the market last year by Scottish & Newcastle. When Spirit, the eventual buyer of the pubs, decided to offload 220 in a leaseback deal, it should have been no surprise, therefore, that Hunter emerged to pick them up. Last week, Scotland on Sunday revealed that David and Simon Reuben had taken a 10 per cent stake in this pubs portfolio, a venture that involved another link in the chain - Nick Leslau. Hunter, Leslau and Cummings have together invested more than GBP 2bn in commercial property, turning their joint venture into one of the biggest investment vehicles of its kind in Britain in just over two years.

They favour similar financing techniques, usually involving the securitisation of cash around the anticipated cash flow from their assets. The deals are highly leveraged so that the price paid is usually backed by debt, with just a small proportion - 10 per cent to 20 per cent - in equity.

They do not use the established venture capital companies, preferring each other's money in cross-shareholdings. They are a sort of elite angel syndicate, supporting each other with upfront cash, advice, years of experience and the kudos that opens doors.

Despite the camaraderie of the leading pair, Hunter and Green have many different characteristics and ways of doing business. Hunter is heavily into philanthropy, while Green's pride and joy is his Gulfstream jet, a fantasy item straight from the characters in the John Grisham novels he admires. The jet and his new yacht on the Cote d'Azur are thought to have cost dollars 90m.

While Hunter enthusiastically promotes his Carnegie-style debt to society and remains headquartered in unassuming Ayrshire, Green is known for his barrow -boy attitude, his outrageous behaviour, London parties and for paying himself more than GBP 200m in the biggest payday in British corporate history. One source who knows them both said: 'Some think Tom is a me-too character, but he isn't. They are very different and have their own ways of doing business.'

Green came to the notice of the Scottish corporate sector in 1990 when his Amber Day company bought the What Everyone Wants chain from Gerald and Vera Weisfeld for GBP 46m. It was to turn ugly in September 1992 when he was forced by his institutional shareholders to resign from the board after announcing that annual profits were 25 per cent lower than had been forecast.

Since then he has vowed never to work in the public company arena again and has often aired his grievances with venom. After tripling profits at Bhs, he told one interviewer: 'The fundamental difference between me and all those other tossers running public companies is that I invest my own money.'

But his departure from Amber Day was not thought to be due solely to the profits warning. He had his enemies, not least among City bear raiders who drove down the price of Amber Day's shares.

Some believe he now enjoys being linked with bids for blue chip quoted companies such as Marks & Spencer and Safeway as a way of getting his revenge on those who made him suffer.

While others believe he is still heading for a fall, he continues to look at deals and to defy his detractors. His success with Bhs and Arcadia have proved he has the Midas touch and it is that reputation that has attracted others into his circle.

While he could not be more different to Hunter's more restrained and less hands-on approach to deal-making, they share a bond that has proved resilient to the vagaries of the market.

Another occasional member of the magic circle is property investor Robert Tchenguiz, who often shares City gossip with Green and Hunter at his rented home in St Tropez or his house near the Royal Albert Hall.

Tchenguiz has also linked up with Cummings, the Edinburgh banker whose day-to -day deals funding warehouse developments in Coatbridge can be punctuated with a phone call requesting another GBP 500m to back the latest assault on the high street. Cummings was ready to back Tchenguiz in a bid for Selfridges only a month before he provided the debt for Green's bid for both Bhs and Arcadia.

Cummings has become an essential cog in this wheeler-dealing and no sooner will Green, Hunter, Tchenguiz or one of their other close associates be linked with a deal than he can expect to get a call. As one source said: 'Peter has more knowledge of the retail sector than any other banker. What these guys like is that he understands what they are doing and gets deals done quickly.'

Green's appearance in Glasgow tomorrow - billed as his first public appearance in Scotland - is through the Entrepreneurial Exchange, the vehicle for promoting enterprise set up and steered by Hunter, who will share the platform alongside Jeff Randall, business editor of the BBC.

While Green has not been known for commenting on the finer points of the macro-economy, interest rates and the retail price index, his views on trends and the shape of the high street in the future are likely to be among the topics he will address.



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