Hillsdown Holdings, PLC
Hillsdown Holdings, PLC
32 Hampstead High Street
London NW3 1QD
Sales: £3 billion (US$5.43 billion)
Stock Index: London
Although Hillsdown Holdings is the United Kingdom’s largest egg packer, poultry and meat processor, and producer of canned goods, few Britons have ever heard of the company. Hillsdown Holdings, as its name implies, is a holding company for some 200 independently operated subsidiaries that together stock the shelves of Britain’s largest food retailers.
Established in 1975, Hillsdown’s growth has been nothing short of phenomenal. The company’s founders, Harry Solomon and David Thompson, were a lawyer and a butcher respectively when they met in 1964. Solomon soon became Thompson’s legal counsel, advising him as he purchased interests in other companies. In the mid-1970s, they decided to form their own company to manage their investments in such fields as timber, stationery, and securities more efficiently. They named their company Hillsdown, after Thompson’s house; rented an office; hired an accountant; and set out to wring value from businesses where others saw none. In so doing, Thompson and Solomon built a company that has had a significant impact on food production in the United Kingdom.
Hillsdown Holdings’ acquisitions began in earnest in 1981, when the company made its first big purchase, of Lockwoods Foods Limited, a bankrupt cannery that Hillsdown paid £3.5 million for. By the time Hillsdown purchased the Imperial Group’s poultry, egg, and animal-feed businesses for £39 million the following year, its acquisition strategy was already in place. In general, Hillsdown shuns hostile takeovers, preferring instead to make friendly arrangements with the company’s present management. The company is committed to capital infusion and refuses to strip assets from newly acquired properties, believing that adding value to commodities is the key to success. Rather than attempt to run their properties themselves, Solomon and Thompson from the start appointed independent managers to run Hillsdown’s subsidiary companies as if they owned them. The company strives to limit overhead caused by red tape and bureaucracy, and often streamlines management at the firms it buys—Lockwoods’ management was reduced to 40 from 120, and a later purchase, Maple Leaf Mills, saw its central staff shrink from 80 to 11. Hillsdown itself maintains a head office of about 20. Control of day-to-day operations remains in the hands of subsidiaries, who report to directors at economically furnished headquarters in North London. Besides an annual meeting with the Hillsdown director for their industry, subsidiaries are simply required to submit a one- or two-page financial report once a month to Hillsdown.
Hillsdown acquisitions in the same industry have not been merged, but are encouraged to compete—even for the privilege of supplying other Hillsdown subsidiaries with raw materials. In this way, the parent company profits by piecing together its many different companies in the fragmented food-processing field into a vertical whole, allowing it to earn money and control quality at every step. For instance, in the poultry business, Hillsdown companies can provide everything from the breeder hen that lays the egg to the frozen Chicken Kiev dinner it will eventually become.
Despite its dominance in the food industry, Hillsdown eschews flashiness in both personnel and products. Solomon and Thompson are notoriously publicity shy, and there are few products that bear Hillsdown’s name. Instead, each product bears the brand of one of Hillsdown’s many subsidiaries, or the mark of one of the leading retailers such as Marks & Spencer, Tesco, and Asda with which Hillsdown has developed close and lucrative ties. The company makes a handsome profit on its willingness to work with its customers to provide whatever it is they want.
In 1983, Hillsdown continued to grow by purchasing ailing and undervalued food companies such as TKM Foods and Smedley’s canning business, both acquired for a token £1, and FMC, Europe’s largest slaughterhouse, for a rock-bottom £4.9 million. The next year, Thompson and Solomon picked up Henry Telfer, a manufacturer of meatpies, again for £1. In its first decade, Hillsdown spent about £50 million making bargain-basement purchases of this sort to become the United Kingdom’s fourth-largest food manufacturer, with sales of £1 billion. But these acquisitions, it soon turned out, were mere warm-up exercises.
Hillsdown Holdings went on a marathon buying binge after it put a quarter of its shares on the market in February, 1985. The company made 42 acquisitions in 20 months, stunning London’s financial community with the pace of its activity. Newspapers reported that Hillsdown bought a new company every six days. Its acquisitions, scattered as they seemed, all fell into one of five major areas: food, timber, furniture, stationery, and property. Skeptics questioned the point of assembling an empire of such disparate parts, and doubted that one company could sensibly manage such far-flung interests. At the end of its spending spree, Hillsdown was the largest British producer of eggs, poultry, meat, and canned goods, and was second in the timber business. Its profits had grown in proportion to its size.
Throughout this period of enormous growth, Hillsdown stuck, for the most part, to a policy of making friendly bids for small companies. London’s financial community waited for what rumormongers called the “big one.” In spring of 1986, it came. Hillsdown began its first large contested bid for a company by increasing its stake in S.&.W. Berisford, a commodities-trading firm that had purchased the British Sugar Corporation in 1982. The company was already conducting talks with an Italian food and agricultural group when Hillsdown came on the scene, and soon Tate & Lyle, another British sugar refiner, entered the fray. In April, Hillsdown made its move, offering to buy Berisford for £486 million with the support of the Italian firm. When both bids were referred to the British Monopolies and Mergers Commission in May, however, Hillsdown withdrew, selling its stake in Berisford back to its Italian partner at a handsome profit.
The following year, Hillsdown strengthened its ability to develop small companies by launching the Hillsdown Investment Trust. HIT was set up to provide money and advice to companies with strong potential that were too small or diverse in activity for Hillsdown to buy outright. Also in 1987 Hillsdown began to expand in earnest beyond British shores. In July, it moved into North America with its purchase of Maple Leaf Mills, a Canadian food conglomerate, for £169 million in cash, its largest acquisition yet. At the same time, it launched operations on the European mainland with the formation of Hillsdown International B.V.
Although Maple Leaf Mills appeared to be an excellent match for Hillsdown’s interests, the large debt Hillsdown incurred to buy it gave British investors sweaty palms. After making 50 purchases in 1987, Hillsdown found itself with a reputation as a rapacious acquisitor that could only make money through constant buying. To counter this impression, the company began to scale back the pace of its purchases in an attempt to consolidate holdings and reduce its level of debt. Hillsdown restrained itself in 1988, buying only 31 small businesses.
Fighting the perception that the company was “a dead duck in a bear market,” as The Independent put it, the company strengthened its overseas holdings through further purchases in the Netherlands and North America, and attempted to demonstrate long-term internal growth, rather than short-term acquisitions-fueled growth. Despite lagging performance from its traditionally troubled red-meat companies, Hillsdown largely succeeded in demonstrating that the firm was sound even when it wasn’t buying food companies as often as most people buy food. Attempting to widen the margin of profit on the commodities it produced, Hillsdown concentrated on adding value to its products by processing them as far as possible.
Despite its strong performance, Hillsdown’s market value remained stagnant in the year following the 1987 stock market crash, in part, again, because the company’s far-flung interests made investors nervous. Moving toward a more unified company profile, in September, 1988 Hillsdown sold off a large timber company and purchased Premier Brands Foods for £195 million in May, 1989. Shortly thereafter, it sold off stationery and printing businesses, so that more than 80% of the company’s sales were concentrated in the food industry.
Also in early 1989, David Thompson, Hillsdown’s co-founder, sold his final 14.5% share in the company, for £154 million. Thompson had first stepped down from an active role in the company in April, 1987, when he sold half his 30% share.
Hillsdown’s continued concentration on purchases in industries in which it already has large holdings helped to solidify its identity and standing in the stock market, but not surprisingly, it has also drawn the unwelcome attention of Britain’s Monopolies and Mergers Commission(MMC).
In the years since its founding, Hillsdown has experienced phenomenal growth with its somewhat unorthodox pattern of acquisitions and strong management principles. Whether it can build on the assets it now owns and continue to buy wisely in the international market depends on its leaders, who now include just one of the founders, and the skill they use in deploying the somewhat inscrutable Hillsdown philosophy.
Beeson Group Limited; Buxted Poultry Limited; Christie-Tyler PLC; Church Farm Turkeys (51%); Classic Ices Limited; Colloids Limited (51%); Culrose Foods Limited; Danegoods (London) Limited; David T. Boyd Limited; Daylay Eggs Limited; J.B. Eastwood Limited; J. Evershed & Son Limited; Farm Kitchen Foods Limited; FMC PLC; Forrest Hodgkinson Holdings Co. Limited; Fresh Country Foods Limited; Vic Hallam PLC; Harvest Poultry Limited; Henry W. Peabody Grain Limited; Henry Telfer Limited; Hermanns Poultry Limited; Hillgas Limited; Hillsdown Limited; Hillsdown Distribution Limited; Hillsdown Insurance Services Limited; Hillsdown International Limited; Hortons Ice Cream Company Limited; I E L Travel Limited (75%); A. S. Juniper & Co., Limited; Lewis Bros. Limited; Ludlam’s Catering Butcher Limited; Meadow Farm Produce PLC; Guy Morton & Sons Limited; Needlers PLC; Nitrovit Limited; Northam Food Trading Inc. (Canada) (85%); North Devon Meat Limited; Nutrikem Limited; Perimax Meat Co. Limited; T. J. Poupart Group Limited; Pyke Holdings PLC; Ross Breeders Limited; Rugby Securities Limited; Sterling Wygate Limited; Swan Foods International Limited; Premier Brands (UK) Ltd.; A.J. Mills & Co. Ltd.; Wirral Foods Ltd.; Kana Foods Ltd.; Grain D’Or Bakeries Ltd.; Rowe Manchett & Till Ltd.; Fiesta Foods Ltd.; Harris Pork and Bacon Group; Barker and Heid Ltd.; Buscted Duckling Ltd.; Hillsdown Turkeys Ltd.; Ross Poultry Ltd.; Peter Hand (GB) Ltd. (51%); Formwood Ltd.; Walker and Homer Group PLC; Fairview New Homes PLC; St. Andrews Properties Ltd.; Pinneys of Scotland Ltd.; Hillsdown International (BV) (the Netherlands); Clearwater UK Ltd.; Hillsdown Iberica S.A. (Spain); Abco Holdings Ltd. (Gibralter).