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Lonrho Plc

Lonrho Plc

4 Grosvenor Place
London SW1X 7DL
United Kingdom
(0171) 201-6000
Fax: (0171) 201-6100

Public Company
Incorporated:
1909 as London & Rhodesia Mining & Land Company
Employees: 94,881
Sales: $3.19 billion (1996)
Stock Exchanges: London NASDAQ
SICs: 3339 Primary Nonferrous Metals, Not Elsewhere Classified; 1041 Gold Ores; 1099 Metal Ores, Not Elsewhere Classified

Once a massive, multinational conglomerate, Lonrho Plc is principally involved in the production of platinum, gold, and coal in Africa. At its peak, Lonrho controlled 900 subsidiary companies operating in Africa, Europe, Asia, and North America, generated revenues in excess of $7 billion, and employed more than one-quarter million workers. Anemic market prices and cumbersome debt forced the company to shed many of its businesses during the 1990s, as a hasty retreat from many industries took place. By the late 1990s, the company was focused mainly on its mining activities in Africa, where the Lonrho enterprise was born and built into an empire by one of centurys most notable businessmen, R.W. Rowland.

Origins of an Empire Builder

During Lonrhos first century of business, no individual figured more prominently than Roland Walter Tiny Rowland. No one even came close. His influence on the companys development was immense, enough to transform a moribund mining and ranching company named London & Rhodesia Mining & Land Company into a sprawling conglomerate that straddled much of the world, with operations blanketing all of Africa. Annual sales during the three decades of Rowlands stewardship increased 787-fold. Profits rose 1,365 times. A company with struggling operations in Rhodesia was shaped into a pan-African empire that, once established, threw its massive corporate weight into Europe, Asia, and North America with resounding success. There was one individual responsible for the meteoric ascension of Lonrho, and that person was the six-foot, two-inch Tiny Rowland, the enigmatic corporate baron whose critics numbered as many as his supporters. Combative, secretive, and more successful than any outsider in the tempestuous political waters of Africa, R.W. Rowland was a flamboyant, buccaneering entrepreneur, a corporate maverick who turned Lonrho into one of the worlds largest conglomerates.

More inclined to let intrigue reign than to divulge facts, Rowland kept purposefully silent about his life before joining Lonrho. Despite his love for secrecy, Rowland did not escape entirely the scrutiny of his many investigators. He was born Roland Walter Fuhrhop in 1918, the son of a German father and British mother. Reports differ as to whether he was born in India or in Germany, but the young Roland did spend his youth in Hamburg, where his parents were regarded as respected merchants. By the time Hitler assumed control over Germany, Roland Fuhrhop was a teenager, and like many of his peers, Roland joined the Hitler Youth, briefly becoming a part of the swelling nationalist movement sweeping across Germany. The young Fuhrhop managed to escape any personal stigma associated with being pro-Nazi, however, and in 1939, for unknown reasons, abandoned his surname, becoming, during the inaugural year of the Second World War, Roland Walter Rowland.

During the war, Rowlands parents were deported to the Isle of Man as illegal aliens, interned there while their two sons joined the war effort. Rowlands brother joined the Wehrmacht as an officer and Rowland joined the Royal Army Medical Corps, serving a three-year tenure as a private before he was discharged from the service, supposedly for creating trouble because his mother was dying in internment. Subsequently, Rowland was detained and sent to an internment camp himself, confined to a camp on the Isle of Man that was inhabited by members of the British fascist party founded by Sir Oswald Ernald Mosley.

Conditions for Rowland improved following the war, when for the first time the young entrepreneur began to demonstrate his prowess in the business world. During the immediate postwar years, Rowland engaged in a diverse range of business activities, as would be his predilection in his later career. He produced refrigerators, car radios, and washing machines, and started his own air cargo business, before making his life-defining move overseas. In 1948, at age 30, Rowland moved to southern Rhodesia (later Zimbabwe), where he began to develop what he later referred to as his deep and abiding love for Africa. Africa presented Rowland with a number of different opportunities, and over the course of the next decade he unleashed his energies in several different directions, cementing his reputation as a savvy entrepreneur. Rowland entered into the farming business, he jumped into mining, he distributed Mercedes automobiles, and he landed a well-paid job as finance and commercial director of Rio-Tinto Zinc, a company making its way toward becoming one of the worlds largest mining concerns. By the end of the 1950s, Rowland had accumulated a small fortune from his variegated business activities and the time had come for his path to cross with Lonrhos.

1961: Rowland Joins Lonrho

Despite his less-than-conventional background and his troubles with the British establishment, Rowland, the discharged private and smoldering iconoclast, soon found himself mixing with British royalty and presiding as a managing director of a British-controlled firm. His introduction to royalty and into Lonrho came from the same person, the Honorable Angus Ogilvy, husband to Queen Elizabeths cousin, Princess Alexandra, and the director of Lonrho. Ogilvy recruited Rowland, convinced that the 44-year-old mining consultant could cure Lonrhos ills. Rowland was ready for the challenge, and he exchanged some of his African assets for a 48 percent stake in Lonrho, joining the company in 1961 when it was more commonly known as the London & Rhodesia Mining & Land Company. At the time, Lonrho was a modestly sized ranching and mining company that was not doing very well. Founded in 1909, the companys sales volume hovered around a mere $10 million and its payroll comprised fewer than 200 employees, including six in London. Once Rowland joined the company, however, torpid growth became a thing of the past. In a few short years his actions would outstrip what had taken a half-century to achieve.

Once named a managing director of Lonrho, Rowland moved quickly to expand the companys interests, using his own portfolio of African holdings as a map for Lonrhos expansion and diversification. The companys involvement in mining and ranching was deepened, and forays into automobile and oil distribution were made. Concurrently, the geographic scope of the company was widened considerably until it embraced nearly all of the African continent. Expansion took Lonrho out of Rhodesia, north of the Limpopo River, and into neighboring Malawi, Zambia, Kenya, Zaire, and Tanzania, transforming the company into an African conglomerate without rival.

It was during his crusade to broaden Lonrhos geographic base that Rowland displayed a talent no one could match, an ability that gave Lonrho a decisive advantage over other companies competing in Africa and made its flamboyant leader a legend. While shuttling throughout Africa in search of business opportunities, Rowland struck lasting personal and political friendships with the men who became leaders of their respective nations. Rowlands ability to win over Africas disparate political personages was astounding, the stuff of the greatest diplomats, effective no matter the ideological leanings of the person involved. Rowland was befriended by rightist authoritarians and leftist revolutionaries alike, confidant to Malawis Kamuzu Hastings Banda, Zambias Kenneth Kaunda, Kenyas Daniel arap Moi, and Zaires Mobutu Sese Seko. With these powerful allies generally amenable to his business plans, Rowland was able to secure vast and diverse holdings for Lonrho, creating a tangle of operating companies that numbered in the hundreds. Annual sales increased exponentially as a result, and soon Rowland reigned over Lonrhos operations with resolute and absolute control, his rule autocratic.

As Rowland shaped Lonrho into a corporate archipelago and his power grew, the aggressive, confrontational managing director gained his detractors, perhaps the inevitable outcome of his singular influence over the fortunes of Lonrho and the way in which he exerted such influence. Feuds with both those within the company and outside its ranks were rampant during Rowlands stewardship of Lonrho, the most notable of which stemmed from a deal Rowland engineered during his first year with the company. In 1961, Rowland obtained the lucrative Beira oil pipeline connecting landlocked Rhodesia to what was then the Portuguese colony of Mozambique. The control of the pipeline was regarded as a coup of sorts, but when Rhodesias Ian Smith announced his Unilateral Declaration of Independence in 1965, British sanctions forced Rowland to shut down the pipeline. Rowland evidently did so, but when a faction of Lonrho insiders were trying to oust Rowland during the early 1970s, the question of whether or not Rowland had complied with British sanctions touched off a highly publicized investigation by the British government, the timing of which did not strike Rowland as a coincidence. The British government launched an investigation into charges that, among other violations, Lonrho had not honored the Rhodesian sanctions, and against this backdrop a power struggle waged by pro-Rowland and anti-Rowland factions ensued.

In 1973, the British government gave its answer, issuing a 600-page report that essentially cleared Rowland of the sanctions-busting charges. Prime Minister Edward Heath took the opportunity to utter his much-quoted feelings on the matter, however, declaring that Lonrho was the unpleasant and unacceptable face of capitalism, a characterization that in the years to follow was used to describe Rowland. One African leader offered his own riposte, referring to Rowland as capitalism with a human face, but Rowland did not let others do his fighting and launched his own attack on Britain in 1976, charging that Britain, through its half-ownership of British Petroleum, was violating Rhodesian sanctions itself. Further acrimony followed, leading to an inclusive end, but the power struggle within Lonrho ended with a decisive victory. From the early 1970s forward, Rowland was in charge as he had never been before.

1980s: Expansion and Controversy

With a firm grip on the reins of command, Rowland guided Lonrho along the path of expansion and diversification, increasing the breadth and scale of the companys operations. Between 1979 and 1981, Rowland paid $200 million for the Princess Hotel Group. In 1981, he purchased one of Britains largest Sunday newspapers, The Observer, which he would use as a bully pulpit to articulate his stance on controversial issues stemming from Lonrhos activities. In 1986, Rowland paid $173 million for oil and gas properties, including 600 producing fields. Myriad deals were made during the 1970s and 1980s, each strengthening Lonrhos position in a wide spectrum of businesses that included mining, farming, ranching, automobile distribution, sugar production, communications, financial services, and nearly anything Rowland could get his hands on. Annual sales by the mid-1980s neared $5 billion, a volume, minus the $10 million Lonrho was generating before his arrival, entirely developed by Rowland.

The continuing sprawl of Lonrho carried the company from its base in Africa into North America, Europe, and Asia, creating a genuine multinational conglomerate crowded with a labyrinthine assortment of subsidiary companies. Lonrho, as one industry pundit observed, was like Rowland, perplexingly diverse and hardly seeming to make a comprehensible whole, a massive grab bag nearly as mysterious as its creator. Rowland, with his forceful personality, managed to embody the eclectic, confusing mash of businesses over which he presided. Despite Lonrhos stature, Rowlands personality and his propensity never to stray too far from controversy made the development of Lonrho, even as it was growing by a billion dollars in sales a year, a subsidiary story next to the highly publicized travails of its creator. This was true during the 1970s, when the acrimony over the Beira pipeline erupted, and it was true during the 1980s, when Rowlands pursuit of a prestigious British retail business stole the headlines.

The trouble began in the mid-1980s when Rowland was attempting to add another plume to Lonrhos hat. For years, Rowland had wanted to acquire House of Fraser Plc., the parent company of, among many other retail properties, Londons Harrods department store. On several occasions his efforts to acquire the prestigious retail business had been parried by the British government on technical grounds, and by the mid-1980s, when he held 29.9 percent of House of Fraser, he was contemplating his next move. Rowland wanted to launch another bid for the company, but he was afraid his bid would be rebuffed again by the government, which, he thought, would reduce the value of his stock once the denial was made public. Consequently, Rowland sold his stock in House of Fraser to an Egyptian businessman and former sidewalk Coca-Cola vendor named Mohammed Al-Fayed, whose rise in the business world was a mystery to many. Al-Fayed, Rowland figured, lacked the resources to acquire House of Fraser on his own, and further, would have great difficulty in gaining the nod of approval from the British government. Rowland was incorrect on both presumptions. In March 1985, in an unusually speedy decision, the British government granted Al-Fayed permission to acquire House of Fraser, and by the time Al-Fayed had received approval he had acquired the cash to complete the deal quickly, reportedly receiving $900 million from Muda Hassanal Bulkiah Muizzadin Waddaulah, otherwise known as the sultan of Brunei.

Rowland, vigilantly on the prowl for suspected conspiracies and seemingly in pursuit of fostering corporate intrigue, was furious. In essence he had attempted to use Al-Fayed to launch his own attack on House of Fraser, but before he knew what was happening Al-Fayed had tucked House of Fraser into his pocket. Never one to turn the cheek, Rowland bitterly opposed the deal, touching off a near-decade-long fight against Al-Fayed. Five publicly funded official investigations were undertaken into the acquisition of House of Fraser before Al-Fayed and Rowland settled their dispute behind closed doors in 1993, by which time Rowland was involved in the fight of his life.

1990s: Power Struggle and Divestiture

As the dispute between Al-Fayed and Rowland occupied the interests of industry observers, Lonrho held sway in a variety of industries. The company was a more than $6 billion enterprise during the late 1980s, generating the bulk of its revenue from Africa but realizing significant income from its worldwide operations. There were 900 subsidiary companies composing Lonrho by this point, and more than 125,000 Lonrho employees were scattered throughout the globe. The company was one of the worlds largest automobile distributors, selling Rolls-Royces, Volkswagens, Audis, Mercedes, and French, Japanese, and American vehicles in Britain, Europe, and Africa. It was the third largest producer of platinum in the world through its ownership of Western Platinum mines in South Africa, which turned out more than one-quarter million ounces annually, and a major gold producer from mines in Ghana and in Zimbabwe, which yielded nearly 500,000 ounces a year. Lonrho also ranked as the largest single producer of food in Africa, owner of 1.5 million acres of land and 125,000 cattle spread across ten countries. Rowlands acquisition of The Observer had been supplemented with the addition of 23 provincial newspapers in the United Kingdom, adding to the might of the company. There were scores of other businesses within the companys fold; together they created a hard-to-follow tangle of companies all contributing to the coffers of Lonrho.

The massive armada of Lonrho companies exited the 1980s at their peak. The early 1990s witnessed the beginning of serious difficulties for the company, but its problems did not stem from the loose amalgamation of businesses that stretched across the globe. The difficulties were born from the companys core business, the mining operations that predated Rowlands arrival. Prices for precious metals began to slide as the decade began, such as the precipitous drop registered by rhodium, a platinum-group metal used in catalytic converters and mined by Lonrho. Between 1990 and 1991, the price of rhodium was cut in half, plunging, from $4,200 an ounce to $2,100 an ounce. For a company as diverse as Lonrho, depressive market prices in one of its many sectors should have had no adverse effect on the companys balance sheet. The wide range of the companys business activities presumably would mitigate the effect of slumping business in one area, but this was not the case. Although mining accounted for only a marginal seven percent of Lonrhos total revenue volume, the proceeds derived from mining contributed a significant 36 percent toward the companys profit total. Moreover, Rowlands seemingly endless feud with Al-Fayed was still raging on, and investor confidence began to wane, as considerable effort, cash, and attention were devoted to the resolution of Rowlands contentious struggle. Profits began to slip, and then plummet meaningfully. Between 1990 and 1992, income dropped from 273 million pounds to 79 million pounds. Debt neared perilously close to one billion pounds. Changes were needed, and many considered that Rowland would be unable to execute the necessary changes that needed to be put in place to restore Lonrhos financial health. Though few questioned Rowlands power as a merchant-statesman, his conduct was perceived as part of the problem contributing to Lonrhos woes. The stage was set, and the drama that followed disappointed no one.

Enter Dieter Bock, a German financier who made his reputation by dealing in property in Germany. Well known only to a tight circle of German financiers, Bock was described as cautious and self-effacing, a mild-mannered businessman without the vociferous aplomb characteristic of Rowland. Bock, as he later related, discovered Lonrho by coincidence during researches into large companies during the 1980s. Though he lacked any appreciable experience in international business on the scale and breadth of Lonrho, he was interested in the company, nevertheless. Bock met Rowland in the fall of 1992 for the first time, and from there the two began to negotiate; what they would agree upon would surprise nearly all those who watched from the wings.

Bock, it was announced in late 1992, would become Lonrhos largest shareholder by January 1993 and, perhaps more surprising, he would share the chief executives position with Rowland from that month forward. Those familiar with Lonrho heard the news and their jaws dropped in disbelief. Not only had Rowland allowed someone else to eclipse his commanding position as the largest shareholder, but he had evidently conferred upon Bock, to a little-known businessman young enough to be his son, with negligible international business experience, the title of heir apparent to the Lonrho empire. It was odd, but soon normalcythe Rowland breed of normalcyreturned to mollify those who were surprised to learn of a gentle transfer of power.

Bock immediately took the initiative. You can really use your business fantasy to create wonderful situations, he confided to African Business shortly after gaining power. That is the most interesting thing about Lonrho. Bock was not about to play the role of tutor to Rowlands mentor, and he quickly set about turning his fantasy into reality. Bock wanted to change Lonrhos management structure, a plan met by stiff resistance from Rowland. Bock cited Rowlands never-ending feud with Al-Fayed as a deleterious drain on company resources, but Rowlands unexpected appeasement with Al-Fayed in 1993 ended the effectiveness of Bocks rallying point before it could gain momentum. Next, Bock claimed that several directors of the company were beyond retirement age and drawing substantial pensions on top of already substantial salaries. A compromise between Bock and Rowland was reached to add new, younger blood to Lonrhos board of directors. Soon after the agreement to admit two new non-executives to Lonrhos board, Bock charged that Rowlands salary and expenses were too rich for Lonrho. Bock wanted Rowland stripped of his executive duties.

Battle after battle took center stage among the upper echelon of Lonrho executives, with Rowland eventually losing the war. Four of his staunch supporters, Chairman Rene Leclezio and board members Sir Peter Youens, Paul Spicer, and Robert Dunlop, resigned in January 1994, signaling the end. In November 1994, Rowland, who had once negotiated a ceasefire in Mozambique and later that same day mediated for an end to civil war in Sudan, was ousted from his chief executive position, effective on the last day of 1994. Part of the agreement reached on November 3, 1994, called for Rowland to resign his seat on Lonrhos board of directors in March 1995. When that month arrived, however, Rowland was his quintessential self. Promising to sue Lonrho for breach of contract, Rowland leveled his words directly at Bock, vowing to pursue him until the end of my days.

On that somewhat foreboding note, Bock set about unraveling the tangled web of subsidiary companies built up by Rowland during his 34-year tenure. The objective, as Bock saw it, was to shed the superfluous layers of Lonrho to expose its core: the businesses involved in mining, trade, agriculture, and hotels, but particularly the companys mining interests. Slated for the auction block were sundry Lonrho businesses involved in automaking, textiles, communications, and financial services, the divestiture of which would reduce the companys staggering debt and lead to a leaner, more profitable enterprise. As Bock spearheaded the dismantling of the Lonrho empire and business and after business was removed from the companys portfolio, the scope of the divestiture program was widened. By mid-1996, the decision had been made to sell the company hotels holdings, principally its Princess Metropole hotel business, its African and United Kingdom trading operations, and its African sugar business.

The sales spree of the 1990s stripped Lonrho of more than half its revenue volume by the time it entered the late 1990s and faced its future as a company almost wholly devoted to mining. Princess Metropole, the trading operations, and the sugar business were expected to be sold in 1997, the same year the company gained a new controlling shareholder. In January 1997, Anglo American Corporation of South Africa Ltd., South Africas largest company, acquired a controlling stake in Lonrho, purchasing a 26 percent interest in the company. From this juncture, Lonrho prepared for the next millennium and its second century of business, its focus narrowed on the production of platinum, gold, and coal in Africa.

Principal Subsidiaries

Lonrho Inc. (United States); Corsyn Consolidated Mines Ltd. (Zimbabwe); Duiker Mining Ltd. (South Africa; 68%); Eastern Platinum Ltd. (South Africa; 73%); Independence Mining (Pvt.) Ltd. (Zimbabwe); Western Platinum Ltd. (South Africa; 73%); Lonrho (Malawi) Ltd.; Lonrho (Namibia) Ltd.; Lonrho Zambia Ltd.; Lonrho South Africa Ltd.; Lonrho Zimbabwe Ltd.; Ashanti Goldfields Company Ltd. (Ghana; 41%).

Further Reading

Barnes, John, Tit for Tat on Londons High Street: A Tiff over the Crown Jewel of British Retailing, U.S. News & World Report, January 30, 1989, p. 63.

Buckingham, Lisa, Sudden End for Britains Last Tycoon, The Guardian, November 4, 1994, p. 26.

Gupte, Pranay B., Inside Lonrho Today, Forbes, March 21, 1988, p. 100.

, The Swami with the Golden Touch, Forbes, March 7, 1988, p. 34.

Hall, Richard, As a Friend, I am Good As an Enemy, I Am Excellent, African Business, November 1994, p. 12.

King, Ralph, Jr., If Anything Happens to Tiny , Forbes, January 12, 1987, p. 291.

LaRue, Gloria T., Rowland Agrees to Quit Lonrho at End of Year, American Metal Market, November 8, 1994, p. 2.

Moore, John, Tiny versus Bock: Another Epic Battle Begins, African Business, November 1994, p. 8.

Munford, Christopher, Bock Wrests Lonrho from Rowland, American Metal Market, January 27, 1994, p. 2.

, Its a Lonrho to Hoe as 4 May Quit, American Metal Market, December 22, 1993, p. 6.

A Riddle within an Enigma: Lonrho, The Economist, December 19, 1992, p. 66.

Sale Brings Lonrho Closer to Demerger, American Metal Market, February 24, 1997, p. 16.

Tieman, Ross, When Breaking Up Is Hard to Do, The Financial Times, July 26, 1996, p. 17.

Tiny Feat, The Economist, December 14, 1991, p. 72.

Tiny in Africa: Private Diplomats, The Economist, September 26, 1992, p. 43.

Jeffrey L. Covell

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