The <i>MT</i> Interview: Robert Tchenguiz

A family name changed in homage to Genghis Khan seems to have rubbed off on the boss of R2O, dealmaker extraordinaire of private equity. Number-crunching opportunist or smooth operator?

by Chris Blackhurst
Last Updated: 31 Aug 2010

The thing that hits you about Robert Tchenguiz's office is the silence.

Here he is, dealmaker extraordinaire; bidder, seemingly, for anything that moves; most feared man in the City - and the place is so damn quiet. It's also totally anonymous. He works from a refurbished block in Curzon Street, in London's Mayfair. It's smart but not grand. The only sign of his presence is the name of his company, R2O, on a list of occupants inside. Blink and you'd miss it.

Come out of the lift and you're greeted by a pair of double doors and a reception, marked Whyte & Mackay, the whisky firm he owns with his brother-in-law, Vivian Imerman. But still nothing to indicate Tchenguiz.

'I'm here to see Robert,' I say, and the pretty woman nods for me to take a seat. On the table in front of me there's the first half of the Financial Times - the second section, companies and markets, has vanished.

There are also some copies of Estates Gazette and Bentley, the magazine for the luxury car's owners.

Apart from the receptionist, I'm the only person there. In the distance I can see figures moving around in glass rooms. Suddenly, a phone erupts. Its tone is very modern, like a piece of techno dance music. She forwards the call. It goes again. She answers this one 'Rotch Group'. It's terribly confusing: Rotch is the firm controlled by Robert's elder brother, Vincent.

Looking around the panelled interior, I realise I've rarely seen such wood. Assuming it's mahogany, there must be half a rain-forest in here.

It's as if the entire executive suite of an old bank headquarters, say, has been uprooted and relocated within a much more up-to-date shell. There are touches of today: the doors are clear glass; computers are visible; and that phone keeps emitting its piercing beeps.

Suddenly, after what seems like an eternity - there's only so much of Bentleys and their devotees you can take - a shortish, stocky man with a luxuriant head of swept-back grey hair is standing in front of me. He's wearing a trademark brilliant white shirt and dark trousers. It's Tchenguiz.

He leads me down the corridor and into a room in which every piece of wall seems to be taken up by memorabilia: pictures of him and his family, the awards he has won, deals he has struck. Inlaid into the large coffee tables are 'tombstone' cards issued by banks to commemorate major financings he has been involved with. Behind me is a model of a large yacht.

He plonks himself down on a large sofa and reaches for what proves to be the first of many cigarettes. He's casual, relaxed, friendly - but controlled. Later, he makes a point of letting me know what happens to those who upset him: 'They only fuck me once.'

Speaking in a thick accent that clearly places him as having originated in the Middle East, he says he avoids publicity. This is strange, given the amount of coverage he receives. 'It's true. There were over 30,000 mentions of me in the newspapers last year.' But he says they didn't originate from him.

This is one of the contradictions about Tchenguiz. This room, this display of success, his glamorous wife, Heather Bird, his spectacular house adjacent to the Royal Albert Hall, his wild past when he dated Caprice, the Wonderbra model, and was reportedly linked to Princess Diana, his love of fast cars, extravagant parties (his 40th for 500 guests was themed Louis XVI and had fire-eaters and acrobats), and a passion for expensive whisky - such things do not suggest the behaviour of a shy man.

Yet he does come across as low-key. There are no airs and graces. He's informal, friendly. He doesn't project a giant personality. In this, he's reminiscent, said someone who knows him well, 'of Richard Branson, even Bill Gates - they're hugely successful but driven by insecurities. Robbie has got an ego but he doesn't let that ego get in the way. He'd rather make more money and listen to people than be on his own. It's like Tiger Woods - he may the best golfer in the world but he listens to his coach four hours a day. Robbie is the same.'

Together with Vincent, he's reckoned to be worth £400 million (Vivian too, is also extremely rich). But he doesn't stop, most recently trying to acquire the Mitchells & Butlers pub and restaurant group. His investments have included Pubmaster, the pub chain; Somerfield supermarkets; petrol stations; Odeon cinemas; a company building masts for 3G networks; health and fitness clubs; Whyte & Mackay; Yates's wine bars; Slug & Lettuce and Hog's Head pubs - the list goes on. He wanted to buy Selfridges. If anything is said to be for sale and the private equity players are thought to be around, the chances are that Tchenguiz will appear as a rumoured buyer.

He seems to be linked to everything and able to call on the heaviest of backers: Royal Bank of Scotland; Barclays Capital; Goldman Sachs; Bank of Scotland.

As well as the companies, there are the properties. With Vincent, he's thought to own 800 commercial buildings, including Shell-Mex House on the Strand in London. Today, the property business is managed by Vincent, via Rotch, while Robert's R2O concentrates on pubs, supermarkets and the rest.

There have been reports of a split, but this is heavily denied. 'Vincent has his businesses, I have mine, that's all,' he says. The pair of them share accounts and back-office support, so while Vincent is based just round the corner, some Rotch staff are located in Robert's building, upstairs.

'We speak all the time and we see each other - he's only 50 yards away.'

The key influence in the brothers' lives is their father, Victor. Now in his eighties and still formidably sharp, Victor's original surname was Kedourie Molaaem. He was an Iraqi Jew who fled Iraq in 1948 to escape persecution and settled in neighbouring Iran. There, in Tehran, he changed his name to the Persian for Genghis, the Mongol emperor.

Victor and his wife, Violet, had three children, the two boys and Lisa, Vivian's wife. Violet came from a wealthy background, while Victor was a natural businessman, buying and selling property. Somehow, despite being a foreigner, Victor became a member of the Shah's inner circle, becoming the royal jeweller and also head of the country's mint. The family were in the elite of Iranian society - the children were pupils at the International School in Tehran and the sons went to university abroad - Robert to Pepperdine in California.

Then the Shah fell. Victor moved the family to London, again displaying enormous dexterity by managing to bring their money over as well.

In 1982, Robert was working in New York, in the World Trade Center, as an oil trader. He visited his parents in London and never went back. He decided to go into real estate. It was, he says, a natural step. Everyone he knew in his family and their circle was investing in property.

He is sensitive to the claim that his father gave him and Vincent, then a foreign exchange dealer, a leg up - that without his input they would have got nowhere. His father, he says, put up £1 million as a bank guarantee - that was all. His first deal was a £50,000 apartment in London's Marble Arch. Soon the Tchenguiz brothers were major landlords in West London, renting out flats to students and tourists.

By the end of the 1980s, they were linked to some of the biggest property plays in London, including the development of 400 flats at Windsor Plaza at Earls Court and Sea Containers House on the South Bank.

It wasn't all plain sailing. There were blips - Rotch invested in South Quay Plaza in Docklands and struggled to find a tenant, for example - but they still made making money look easy. Their formula was nearly always the same: borrow heavily to buy the building, use high rental returns to pay off the loan. Robert has applied the same recipe to his non-property interests.

'At the start,' says one of his closest advisers, 'he puts money into a business, then uses the cashflow to pay off the debt. Once that's done, he uses the cash it's continuing to generate to go into something else - and on he goes.'

The adviser said it was quite wrong to think of Tchenguiz as a short-termist. There have been deals where he'd been quickly in and out, for specific reasons. In general, he says, 'he is a venture capitalist, really - although even venture capitalists think in terms of the year-on-year increase in the equity they've put in. Robbie isn't like that. He thinks much more long-term - to him, five and 10 years are the same.'

So how does he do it? Says Tchenguiz: 'People make much of my family and my background, but what they make very little of is my love and understanding of numbers. I've always taken number methodology to deals. I assess the models, calculate the risk. Same at backgammon - I assess the game, calculate the risks. Whatever I'm doing, I'm thinking numbers.'

He laughs. 'It started at school - I was bad at history, good at maths.'

He's similar in many ways to his close pal and fellow raider Philip Green.

The retail billionaire also didn't perform well in any subject at school, apart from maths, where he displayed an exceptional capacity for mental arithmetic. 'Robbie has a very agile mind. He has this ability to cut straight to the right issues and just nail them,' says the adviser. 'I remember we had a meeting with him and he said: "Do this and this. Okay?" Done. He's very fast.'

When I mentioned Tchenguiz to a captain of industry who chaired the defence for one of his would-be takeover victims, he was apoplectic. Tchenguiz, he declared, was a chancer, a number-crunching opportunist, who regards whichever business he happens to be investing in as a mere commodity.

The adviser said he'd heard the same allegation, that there was no doubting this was Tchenguiz's reputation, but it was unfair. Partly, he said, it's his reticence - he's happiest in his Mayfair lair doing the sums. He does journey out into the pubs and supermarkets he owns - 'he likes the satisfaction of saying "that's mine", admits the adviser - but he'd rather leave the running of them to others. Says another insider: 'Robbie, Vincent and Vivian have all got this healthy respect for other people and their point of view. They trust people to do things for them.'

Snobbishness, he maintained, also played a role. 'Robbie Tchenguiz is seen as this playboy businessman, when the reality is he's more professional than any aristocratic Oxbridge big-shot. He's very straightforward. He's got more principles than the people in the City who say they've got principles.

It would be far better if people got to know him instead of thinking he's some dodgy Iraqi.'

Tchenguiz acknowledges the problem. 'We're expected to be operators but that's not what we do. We're not operators. We tend to find appropriate operators to work for us. We don't interfere. We choose a manager and let him run it - if he's not good enough, we change him.'

He relies heavily on management consultants: 'Bain, McKinsey - we use them all.' Sometimes, he will even use two firms on the same project - to see what they come up with. It's expensive, 'but it's a small price to pay'.

These consultants are brought in to study an opportunity, to report back - often in a very short time-frame. Then, if he's successful, they will frequently be asked to devise a workable strategy. 'I'm not a retailer,' he says, shrugging, 'but I know where to go to get retail skills. I'm not a publican, but I know where to go to get publican skills. Anyone who says they have all those skills is lying.'

In all, he says, R2O employs 12 people. 'They're all here on this floor.' Mostly, they're ex-bankers. They maintain a 'constant dialogue' with the businesses R2O controls. Once a month, Tchenguiz will attend the board meetings of each of his operations; and every week, they have to send a trading statement to R2O.

'If you came here at 9.30 tonight you would find people working. We work very hard. I spend 90% of my time here. I spend more time here than I do at home,' he says, smiling. 'These people are like my family, they're all my friends.'

When we meet, he's just been rebuffed by Mitchells & Butlers. 'I'm a bit disappointed. As soon as somebody comes along offering a 30% premium, all of a sudden they say it's worth more - Stuart Rose did the same to Philip (Green) at Marks & Spencer. Why did they not say that two months ago?'

The price argument, he claims, doesn't stack up. The company also mounted a vigorous campaign, claiming the business would be damaged if it was taken over by private equity. 'That really isn't fair,' he says. 'There's a lot of guys in the City pointing at private equity - yet private equity is crucial to this environment we're in. And too many mediocre managements are using the perception of private equity as a reason for not dealing with us. We're not asset-strippers.'

This is a raw point. 'The City should be thanking us for pushing mediocre managements. So why aren't we welcomed? It's because we're misunderstood.

Private equity is seen as bad for shareholders. Use the word "hostile" and everyone runs a mile. You saw that with Philip and M&S. I don't get it. On Mitchells & Butlers, if the institutions are saying: "We're not selling, the company is worth a lot more", then why aren't they buying the shares? There they are, saying it's worth more. Okay, buy the shares if you really believe that. But they don't. Why? Because what this is actually about is the closeness of the management to the City - they're guys who go to lunch with each other every day. If somebody goes against them they will get shot. Not one institution came out for our premium, and that can't be right.'

He won't let this go. 'Look at Philip. He buys in the private sector on a daily basis and there are no headaches. Somehow, when Philip Green tries to buy a public company, that's different. You saw it with Mitchells & Butler.'

Ask a silly question. Is he depressed about it? 'You get on with life,' he says, firmly. What he isn't happy about is the idea that he's an outsider.

The truth is that as a lone operator, albeit with heavy backers, and foreign to boot, he is - but he's not comfortable with the us-and-them situation that has developed. 'I don't like to be seen as swimming against the tide.'

So, has Mitchells & Butlers put him off? 'No. If the right deal comes along, I'll do it.' Listen, he says, puffing on his cigarette, 'the City should welcome the added value people like ourselves, Macquarie and KKR are bringing.' He adds: 'I don't want this to be seen as sour grapes.'

Of course not. Is there a feeling of the momentum starting to slow down?

He nods. 'It's becoming more and more difficult to do these types of deals - and that can only be bad for shareholders.'

Things have to change, he says. 'If they don't, then I don't see how companies can be efficient, how they can be competitive. People have to ask themselves: why is it that old-school businessmen make a fraction of the new school? It's because they're so set in their ways.'

He saw it in the property industry. There, he argues, 'very large companies dominated the landscape. Then, smaller companies came along and started to make fortunes - they weren't so scared of borrowing and using debt.'

New versus old, insider versus outsider - there's no doubt where Tchenguiz comes and where he sees himself. But he's also saying it doesn't need to be like this, that he's not the scary monster he's sometimes portrayed as.

He's also baffled that some bankers are prepared to embrace him and others aren't. 'Part of our success is thanks to the City. Without the banks, we don't have a business. Our partners have included Royal Bank of Scotland, Barclays, HBOS and Apax. The City has played a crucial role in what we do.' The reality is, it's horses for courses. One bank will happily lend him what he wants; another is mounting a defence. It probably isn't as personal as he supposes.

But it doesn't help that he's regarded as someone who wants to take companies private, who eschews public ownership and snubs the main stock market.

'The responsibility of being a plc is just not something I'm prepared to take at the present time,' he says. 'Most plc decision-makers are taking little financial risk. We have significant financial risk that isn't about selling someone 2,000 shares. I don't want the responsibility of other people's money on my hands.'

It's that aspect, he says, and not the need to be transparent and to report regularly that steers him down the private route. 'Reporting isn't something we shy away from. It's purely the worry of having people's pensions tied up in my business. If I do a deal we take a substantial personal risk ourselves - so if the thing goes wrong I will be the biggest loser, not someone else.'

One weakness in the Tchenguiz approach, it's widely thought, is his exposure to rising interest rates. It's no coincidence that so many of his deals have come in recent years, while rates have been low and borrowing cheap.

If they rise, isn't he in trouble? He smiles again. 'We take no interest-rate risk. Everything we do is interest-rate hedged. Of course, interest rates may affect values in the short term, but because we're long-term players and we're always financed long-term, it's not a problem.

We're able to pick a time when we exit - not have it picked for us.'

Of course, if it all gets too much, if the opportunities really start to dry up, if the old guard as he perceives them continue to give him a hard time, he could always quit Britain. He doesn't need to be in the UK, does he? 'I love it here. The UK has the finest and most advanced financial market in the world. The UK banks are the world leaders. It has the most robust legal and financial regulatory framework - very important when you're using your own money. Elsewhere in the world, like France, there's always the possibility it could just be taken away from you, without compensation. That can't happen here. It has English, the language of business - that's a key factor. And it's so business-friendly. People aren't stopped from doing business.'

Mittal tries to acquire Arcelor and France goes mad. Here, he says, 'it's much more laissez-faire. The country invites people from all over the world to come - and they stay.'

There has been talk of him planning to develop a new British sports car.

'I'm car mad, it's true - but no, I wouldn't do that.' In winter, he shoots in the country. In the summer, he goes boating in the Med, 'in the boat behind you,' he says, pointing to the model of what is clearly a grand vessel.

'I've had my fair share of luck,' he says - possibly intending to make me feel better, as I stare at the imposing ship. Would he do things any differently? 'My one regret is that I didn't have children earlier. I've got a baby who is 10 months and I'm 46 - I wish I'd had children earlier.' (It's a view shared by his father, Victor, who is outside keeping Harry, our photographer, entertained.)

You see, he's a big softie, really. If only people knew.


1. To prove that Somerfield is more than a property play

2. To show that he's as much a manager as he is a financial opportunist

3. To make himself and R20 better understood

4. To reach a point where managements' first reaction is to be pleased he wants to take them over


1960 Born 9 September in Tehran. Educated International Community School Tehran; Pepperdine University, Malibu, US

1982 Trader in New York, buying and selling heating oil

1983 Does first property deal in the UK, forms Rotch with his brother Vincent

1987 Completes development of 400 flats at Windsor Plaza in Earls Court, London

2004 Buys Odeon Cinemas, then sells them

2005 Pays £1.5bn for Somerfield, loses bid battle for Spirit pub group

2006 Considers buying Mitchells & Butlers for £4.6bn.

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