The acquisition of a Coventry-based metal basher was what put Williams Holdings on the map, Nigel Rudd tells Chris Blackhurst.
When newspapers and magazines compile those articles on "Stars of the '90s", under business, almost invariably, will appear the name of Nigel Rudd. For if the past decade is anything to go by, the 44-year-old chairman of Williams Holdings, the Derby-based conglomerate, cannot fail. Just nine years after paying £400,000 for a near bankrupt Welsh foundry, his company is today worth more than £1 billion. A string of deals - kitchens, fire protection equipment, paints, Rawlplug, Polyfilla - made Williams the best-performing alpha stock during Mrs Thatcher's 11 years in power. The Major era already shows promise: when Rudd announced recently the agreed £318 million bid for Yale and Valor, shares in Williams rose - so confident was the City of his proven ability to extract a good price and turn a business round.
His approach is simple. He only buys a business if it has a big market share. Once bought, heavy pruning and investment in new equipment combine to make it the lowest cost producer.
Although his company is frequently referred to as the "Hanson of the '90s", Rudd's philosophy, as he points out, is not the same. "We're different from Hanson. We believe you have to spend money on your businesses - if you do that and combine it with market share your competitors have got no chance."
Despite his penchant for low-tech manufacturing, Rudd is not a traditional industrial boss. Williams is not in the Confederation of British Industry and he never bleats about City short-termism ("What we've done would not have been possible without the help of the City, so we don't shout and cry when our shares are sold"). For someone who has made so many deals, he chooses his best remarkably easily. It is not the purchase of Pilgrim House in the United States for £331 million or the sale of Crown Berger for £205 million or even Yale and Valor. Instead, he claims, if he does fulfil all the predictions that are made of him it will be because he bought J and HB Jackson, a Coventry-based metal basher, for £31 million in 1985.
In December 1984 Williams was a small, successful company with a reputation for transforming loss-making businesses. But, with assets of £10 million and debts of £11 million, progress was painfully slow. Rudd and his partner, Brian McGowan, discussed how things could be speeded up. "We could go down one of two routes," recalls Rudd. "Either we could spend our careers getting rubbish to run well or we could buy a decent company straight out." But he adds: "With our borrowings, if the slightest thing went wrong we'd be blown away."
What they wanted, ideally, was a "rubbish" company that was also cash rich. "We fished about quite a lot but it seemed impossible."
Then on Boxing Day 1984, fed up with his children, Rudd grabbed the nearest magazine that he could find and sought sanctuary in a bubble bath. There, in the pre-Christmas edition of Investors Chronicle, he read about a depressed forging, metals and plastics engineering company called J and HB Jackson. "It was the word 'boring' in the headline that grabbed my attention," says Rudd. "It seemed like just the sort of company we were always looking at." But there was a difference: Jackson had £26 million worth of assets and £11 million in cash (Williams, which had the same market capitalisation, had £10 million of assets and £11 million in debts).
Rudd jumped out of his bath. "I thought 'Christ, if we can get hold of it we'd double our market cap, have assets of £30 million and no borrowings'."
Rudd and McGowan set to work. They produced a detailed, 46-page document explaining why Jackson was an ideal fit for Williams. They took it to Schroders, the merchant bank, which agreed to act.
Rudd went to see Philip White, Jackson's chairman, at his farm in the Isle of Man. Rudd said that both parties could benefit from an agreed bid - provided that White did not demand too high a price. Williams would pay for Jackson in shares. The City would like the deal so much, promised Rudd, that Williams' share price would rise - thereby making a profit for White and his fellow Jackson shareholders.
White consulted the blue-blooded Barings, Jackson's merchant bank. "They were extremely dubious about us," says Rudd. "They told him not to touch us with a barge pole."
On March 4 1985 Rudd announced a £24 million bid for Jackson. The City agreed with his logic: the ambitious but hard-up Williams would make an excellent match for the lacklustre but rich Jackson. The shares of both companies climbed.
Despite the rejection, Rudd persuaded White to continue talking. He pointed to the rise in Williams' shares and tried to convince White that as Jackson's major shareholder he stood to gain most. Finally, White cracked: in return for a cash alternative, he would recommend the bid. Given the rise in Williams' share price, Barings could no longer advise him to continue to reject the offer. "They tried all over the City to find another bidder but eventually they had to recommend it," says Rudd.
Immediately Williams set about absorbing Jackson. Its main asset, and the raison d'etre for the bid, took just three and a half minutes to merge into Williams. "Their cash integrated with our overdraft very quickly. It was the fastest integration we've ever done," beams Rudd.
(Chris Blackhurst is City editor of the Sunday Express.)