UK: Conquests of the cautious Cayzers - success of Cayzer family AND CALEDONIAN INVESTMENTS.

UK: Conquests of the cautious Cayzers - success of Cayzer family AND CALEDONIAN INVESTMENTS. - For 30 years British and Commonwealth Holdings - one-time owner of the world's biggest cargo ship fleet - lived at St Mary's Axe in the City, with a roster of

Last Updated: 31 Aug 2010

For 30 years British and Commonwealth Holdings - one-time owner of the world's biggest cargo ship fleet - lived at St Mary's Axe in the City, with a roster of crusty seamen greeting visitors at the front desk. One Thursday in mid-1987 they were all sacked. Next day, the old salts had been replaced by leggy women in fitted suits with million-dollar smiles. B and C's new chief executive, John Gunn, was making his mark on the old Cayzer family empire.

Upstairs on the first floor, Lord Cayzer, chairman of B and C and distinguished head of the Cornish-bred family now thought to be worth £400 million, sat down to his lunch in the executive dining room. The menu had changed. Instead of the old "school food" that he loved - the steak and kidney pie and spotted dick - there was nouvelle cuisine: weightless bits of bird and pineapple, and peas still in their pods. His clever find, this man John Gunn, clearly had as much nerve as style.

These were small incidences - considering what was to follow: Gunn's build up of B and C into the biggest finance house in London, and then its resounding crash in June 1990, when its failed subsidiary, Atlantic Computers, exposed the group's Achilles' heel. Even more extraordinary was the heroic escape of the Cayzer family.

In this same summer of 1987, Lord Cayzer, who had laboured for 40 years to build up the B and C empire, decided he had had enough of his chief executive's flamoyant style. With ruthless conviction, he sold out of B and C for £427 million. His timing was exquisite. Weeks later, the October '87 stockmarket crash shattered London, and B and C's share price plunged. From then on, in City eyes, these were the "canny Cayzers": they had timing, they had style, and most of all, they had serious money.

The story of the rise and rise of the Cayzer family is a story of the triumph of caution over speed. In the '80s, John Gunn was the personification of his time: fast-talking, fast moving and ready to deal with anyone if it would grab the headlines. The opposite culture, which has taken the upper hand in these cheerless times, is typical Cayzer. Lord William Nicholas Cayzer, second baronet of Roffey Park, Eton and Cambridge educated, is the epitome of white-gloved power. He is a tall, strong-willed character who "anyone could pick out as chairman in a boardroom line up" as veteran Caledonia director Geoffrey Adkin puts it. A former manager recalls, "Reporting to him was a terrifying experience."

As chairman of the publicly-listed 46% controlled Caledonia Investments, which is now the family's main vehicle, Lord Cayzer conducts his business on a basis of trust, with old and loyal contacts, and a tight fist on every pound. Lord Cayzer's nephew and now Caledonia chief executive, Peter Buckley, comes from a similar mould, but his accounting background, if anything, makes him even more fastidious and sceptical.

On the edge of St Katherine's Dock, in a yellow brick building laced with grand model ships, Peter Buckley sits in perfect calm and, with the caution of one alient to publicity, and yet almost a secret enjoyment of its novelty, he tells the Cayzer tale. He is patient; he is polite. Only the spectacles twirling in one hand, and a cheerful account of a jeep trip round the Mediterranean in his teens, betray his covert enjoyment of the thrill of "doing a deal". If, at 49, he is impatient to have the bit in his teeth, he does not show it. On the contrary, he refers to himself as the one who "just happens to be in charge of the team". For three generations each Cayzer chairman has retained his seat to the end. No doubt, Lord Cayzer will do the same.

Since its sweeping exit from B and C in 1987, Caledonia Investments has been having a grand time spending its £427 million. Naturally there has been no shortage of people eager to help the family out with its weightly problem. Advisors, laden to the teeth with bright ideas, have queued at the Cayzer's door. But to get from the door into Caledonia's pockets is another matter.

Murky-browned and pencil at the ready, Buckley pares each comer to the core to see if the facts behind the grand ideas match up to his punishing criteria. Those who know the secretive family describe the style of the board as "consensual, almost Japanese". Gentlemanly attitudes prevail - a hostile takeover is unthinkable - but narrow-minded they are not. One observer recalls a scruffy media personality mincing in, tieless and briefcaseless, to present an investment opportunity to the Cayzers, his papers bulging from a plastic bag. His story was so good, the Cayzers did a deal. Another set of castaways - the young managers of Edinburgh Crystal Glass - who found themselves out in the street after their parent company Coloroll collapsed, also passed the muster. Managing director, Bill Soutar, contrasts the "action-packed" style of Coloroll's John Ashcroft with the "very comforting hand" from Caledonia. "But it's not a soft touch - just sufficient to keep us working from 7 am to 10 at night," he laughs.

Gravelly voiced and sporting a pocket handkerchief that looks unthinkably like a paper tissue, Buckley explains how Caledonia has returned to its old philosophy of spreading its risk. To its traditional holdings in chemical firm Amber Industrial (75%) and engineering group Sterling Industries (21%), it has added spicier touches: financial services, brewing, the media. At first look, the company would seem to be an investor's dream. IT has no net borrowings, it is sitting on some clever investments, and, most of all, it has cash - from April, some £200 million of it.

Yet curiously, over the past few years, Caledonia has underperformed the sharemarket. This is due partly to the long-term attitude of the Cayzers: few investors today have blood so blue as to think beyond the next few years. But more importantly, as interest rates have fallen, so have the returns on the lucrative pile of cash, while its minority equity holdings have yielded only dividends.

Buckley admits that the shares' poor performance is "not totally satisfactory, but not out of line with similar investment companies." The recent £78.5 million backing of a management buyout (MBO) at old-time friend Bristow Helicopters could indicate that Buckley is aiming to push earnings up. Without Bristow, Caledonia's profits would have been significantly down this year. As it is, BZW analyst Karen Bennett predicts a restrained dip to £33 million pre-tax on last year's £35.3 million.

Other professional Caledonia watchers have dared to suggest that perhaps the Cayzers are now simply too cautious, and their holdings too small and diverse. "It's run like a club," says one critic. "You go in and all the men look the same, sound the same, and wear the same suits and ties. Caledonia might benefit from having one or two people with brown shoes and short-sleeved shirts, rather than French cuffs - someone more abrasive. With the consensus approach it just needs one nervous voice to kill an idea." Buckley no doubt will disagree, but the funny thing is, it was a character who probably wore brown shoes who made the family its first fortune.

For the Cayzer story started more than a century ago, with a schoolmaster's son called Charles William Cayzer - a precocious lad who could well afford to take risks. A youth spent by the Thames gave the young Cayzer a passion for sailing which took him to Bombay and then to Liverpool, where he sat up selling ship stores. In 1878, at age 35 and in partnership with Captain Alexander Irving, Charles Cayzer founded Cayzer, Irvine and Co.

Backed by borrowings, the young businessman soon wrangled deals that had his Clan Line Association Steamers serving India and South Africa. When he died in 1916, having won a seat in parliament and a knighthood, his sons took over the firm, shifting its head office to London. Two of his offspring succeeded him in the chair: Sir August Cayzer, and the first Lord Rotherwick.

It was in the mid-'50s, when Lord Rotherwick fell ill, that the present Lord Cayzer, at age 45, rose to prominence. A fierce battle was under way, with the Clan Line bidding for control of the prestigious Union-Castle "Golden Line". In October 1955 Union-Castle succumbed, and the Cayzers leaped to the peak of their industry, renaming the 100-plus ship merged firm British and Commonwealth Shipping. Caledonia Investments, set up in 1951 and floated in 1960, was used as the holding vehicle for the family's 49% B and C stake.

Those were days of crackling change, when the gentleman owners of shipping lines had to witness the fall of their fleets before the new innovations of containerisation and air travel. Alert to the changes, Lord Cayzer diversified through the '60s and '70s. His tactics led to holdings in British United Airways and Bristow Helicopters: the latter thrived in the oil industry boom, while BUA was sold on, the Cayzers keeping a smaller island-hopper which has since become Air UK.

In 1969, Lord Cayzer got his first serious sniff of the lucrative world of finance. As the family was already involved in investment, he decided to set up a new firm, Gartmore Investment Management, naming it after a family home in Scotland. It was the subsequent success of this financial animal that made Lord Cayzer look again when, a few years later, a similar door opened. Today he probably wishes he had slammed it shut.

Bill Campbell Allan, the head of Gartmore, in the course of business one day met the effervescent John Gunn, head of money broker Exco. Inspired by this large man's enthusiasm and talent, he introduced him to Lord Cayzer. "Lord Cayzer became fascinated by John Gunn, who talked faster than anybody else," recalls Gartmore's current chairman Paul Myners.

When Lord Cayzer first agreed to back John Gunn in 1979, contributing to a £5.2 million buyout of Exco for a 30% stake, he probably thought the association would end there. But Gunn made money for the Cayzers like no one else. Exco surged in value, floating on the market at £56 million in 1981 and by 1985 was worth £500 million, an extraordinary 100-fold increase in just six years. Gunn also talked the Cayzers into investing in a 24% stake in Telerate, a financial information service, in 1981. Four years later the stake was sold for a £50-million profit. Whether it was luck or acumen, the Cayzers got the timing right. Soon after the share price plunged.

What followed remains a curiosity to this day. B and C and Exco had quickly grown closer through a series of deals. Then, in 1985, a furore at Exco and a walkout by Gunn, made the headlines. Here was the boy wonder of the '80s - John Gunn, the "aquaped" who could walk on water - out in the street, up for grabs. Offers flowed in, but to the surprise of all, Gunn instead chose the direly conservative B and C group as his new home. The lure was clear; B and C was stuffed full of goodies, properties that had not been revalued for 30 years and scores of modestly accounted for businesses.

For the first year, as a director "without portfolio", Gunn obviously impressed Lord Cayzer. In 1986, he was made chief executive of B and C and the group's share price soared. It was a sad and resounding blow to Peter Buckley - it was he who had always been seen as the successor to his uncle Lord Cayzer.

From the outside, it seemed Gunn was performing magic on this old-fashioned company. Exco, which had been torn asunder from B and C after Gunn's defection, was purchased back for £655 million. Abaco, a company in which Gunn and two of his old colleagues, Peter Goldie and Rusty Ashman (both of whom joined B and C), all had substantial shareholdings, was also bought by B and C, yielding each of them a hearty personal profit. To top it off, two small B and C banks were blown up into the new largescale B and C Merchant Bankn. Gunn swept in a score of old pals from Guinness Mahon. Reports one manager who promptly left: "I took one look at these people and thought I'd be better off without them."

From inside B and C the picture was different. On the first floor of the red brick Cayzer House, Lord Cayzer occupied one suite of offices, while at the other end of the corridor, John Gunn and his abrasive chief executive Peter Goldie had another. Peter Buckley sweeps aside the memory of those days with the comment that there was "a considerable reduction in communications". Others report that, at best, Gunn was reporting his actions to board meetings - sometimes after the fact: he saw no need to consult a family who did not understand his ways. The salaries being doled out must have turned Lord Cayzer white. In 1987 John Gunn, Peter Goldie and Julian Lee were being paid £500,000 plus share options, compared with Cayzer family top salaries of £150,000.

It took two years for the Cayzers to decide enough was enough. Gunn was clearly intent on making B and C a pure finance house, built on a pile of debt. In June 1987, Caledonia Investments sold out of B and C for £100 million cash and £327.5 million in redeemable preference shares. Peter Buckley, who from then took over as guardian of the Cayzer fortune, cleverly secured a bank guarantee, because "if you're getting money on deferred terms it's just good common-sense". It was the Cayzer's coup d'etat. Three years later B and C collapsed leaving scores of distraught creditors.

The publicity that arose from the B and C fiasco was enough to send the notoriously shy Cayzer family back underground. Hardly a whisper has been heard since, though in its tidy, discreet way Caledonia has been pulling together a substantial new portfolio. And true to form Caledonia's choices look to be canny ones. Several assets, including the successful London Forfaiting and British Air Transport, were bought out of the failed B and C. A 5.7% stake in Christies, bought in 1988, was sold for near double in 1990 - just before the art market collapsed. After the 1987 crash, Caledonian picked up a chunk of English and Scottish Investors, which has since risen by 45%. Cherry-picking with a passion, the group has picked up 25% of merchant bank Close Brothers, 75% of Clan Asset Management, 5% of brewer Vaux Group, 5.5% of Capital Radio, 25% of Harry Ramsdens, and the prestigious Sloane Club in Chelsea.

Mercifully for the rest of us, a certain human fallibility has also been exposed. Some of the pickings, like Anglo American Agriculture and property surveyors de Morgan, have not done so well. But historically the Cayzer strike rate is high. Buckley attributes this to choosiness: the price, the people, and the follow-up stewardship of the firm must be right. "There's no substitute for the daily routine and being attentive to detail," he sums up.

The ultimate dream of Caledonia's indefatigable chief executive is, as he blandly puts it, to build a "spread of soundly-based and promising holdings." At this point of the Cayzer's family's tumultuous history, it is still too early to judge what will follow: are they at the foot of a new mountain of fortune, or slipping down the slope of the last? Caution has its rewards. Too true. However it can also have a price. But then who are we to say - one thing Peter Buckley plainly knows is that the Cayzers never got anywhere by listening to anyone else. It took three generations for Charles Cayzer's dream to become 100 seabourne ships. Buckley is a man of patience.

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