by Tom Bower
By April 1984, Jarratt and Carpenter were seriously worried. Thornton had adopted a very high profile, eagerly giving press interviews about worker participation and the need for massive investments where he outlined his undiscussed plans to build a new printing plant costing £20 million in Manchester and to launch a range of new daily and evening newspapers once the Mirror was independent. Thornton, it was clear to the two Reed executives, was no longer just floating the company but apparently launching himself as a nascent newspaper baron. Of equal concern was Thornton's speculation in the interviews about worker participation and the need for massive investments by the unions and the Labour Party in the new group to protect it from capitalist predators, especially Maxwell. Carpenter feared that if reports of Thornton's arguments with the unions and the Mirror managers did not dissuade potential investors' interest, then his populism would certainly deter the conservative elements in the City. In Thornton's view, if he did not find a formula for industrial peace and a reduction of expenses, there would never be a float. 'It was my open-mouth policy,' he says, 'because I was the ham in the sandwich between Reed, the unions and the potential investors.'
By June 1984, Reed and its advisers had become decidedly unsympathetic towards their nominee, who they believed was becoming an unwelcome liability: 'We wanted a sale, not a lot of socialist rubbish which was damaging the chances of the sale.' In the third week of June, they set 19 July as the irrevocable date for the float. For the countdown, Thornton's office in the Mirror building was turned into a battle headquarters, housing up to twenty advisers to write the prospectus for potential investors. Among those advisers was Derek Higgs of Warburgs, Reed's merchant bankers, who had unexpectedly delivered some very gloomy news.
Twelve months earlier, Higgs had estimated the Mirror Group to be worth £100 million and had hailed Thornton's appointment as 'a masterstroke', but he was fast revising his opinion. Price Waterhouse, the accountants, had been asked to undertake an independent survey to produce the 'short form' report for the prospectus which would give investors an informed idea about the company's true value. Unknown to the unions or many managers, the accountants had surreptitiously visited the Mirror building at sensitive moments and noted the excesses. Among their revelations was that 'James Bond' and 'Mickey Mouse' had signed on as printers, and the discovery of horrendous facts about the petty cash, the car pool, drinks and women. The group was more out of control than anyone had realised. Everyone's fears seemed confirmed by a short SOGAT strike in the spring. Considering that there was also a possible liability for large redundancy payments, the bankers told Reed on 27 June that they would be lucky to receive £60 million and it might fall as low as £40 million. Thornton was furious: 'They completely undervalued their assets and the pension fund,' he says, but Warburgs insist that their assessment was fair.
Jarratt and Carpenter were also shaken by the sudden diminution of their potential prize. Their options suddenly seemed to be quite limited because of their public assurance that no dominant shareholder would be permitted to buy control and because employees were to be encouraged to buy shares. However, they decided that there was no alternative other than to proceed and, after much discussion, the mechanism to implement that assurance was agreed at the end of June. The articles of the new company would forbid the registration of one person's share ownership if it exceeded 15 per cent. Just four days after agreeing that clause, the very person whom it was intended to obstruct made an anticipatory move. Maxwell once again fulfilled his notable reputation as a master of timing.
How Maxwell discovered about the 15 per cent rule and that the flotation was becoming stymied by disarray among the personalities involved has been a matter of conjecture ever since. Thornton is certain that Maxwell had an informant among his own staff on the ninth floor: 'How else would he have known?' Jarratt implies the same: 'Mr Maxwell was certainly well informed.' Traces of paranoia often afflict Maxwell's victims since it is an element of his tactics. Part of the explanation may well be that, metaphorically and physically, Maxwell is always awake when others are asleep and he undoubtedly did have good contacts among the senior Sunday Mirror executives.
Alternatively, he might have read about the Mirror Group's problems in the Financial Times.
Maxwell's lust to own a national newspaper had been an unfulfilled ambition for fifteen years. In the previous three years there had two other opportunities. The first was the Times group which Thomson offered for sale in October 1980. Maxwell was the first to show an interest but since he was still in the midst of battling to win control of BPC he was dismissed as having neither the money nor the reputation as a candidate for the Top People's newspaper. His second and more serious bid was launched in April 1984 for the Observer. Tiny Rowland, the newspaper's owner, was in the midst of a public row with the newspaper's editor, Donald Trelford. Their disagreement concerned a story, written by Trelford about atrocities allegedly committed in Zimbabwe, which greatly embarrassed Rowland, who prides himself on affectionate relations with Africa's leaders. Rowland, like many tycoons, was unaccustomed to being defied by his employees, especially those who were not earning any profits. But Rowland's arsenal of threats was limited since Trelford had won the decisive support of the independent directors whose authority had been guaranteed by Rowland as a condition of his original purchase. Rowland's only course was either to accept defeat or to sell the newspaper. He hinted that he was 'fed up' and considering the latter option and released the news the day before the independent directors and their editor were due to meet. Trelford, who was already concerned because Britain's oldest newspaper had barely recovered from a succession of ownerships, became alarmed when Rowland also leaked that the new owner could be Maxwell, whom he described as a 'super leader' for the paper. That was of course exactly what Trelford was resisting. 'I'd want the same guarantees of independence,' he said, thinking aloud about Maxwell's condemnation of his recent report that Mark Thatcher, the Prime Minister's son, had been engaged in doubtful business exploits in Oman.
The Observer's directors were due to meet at midday on 23 April and Maxwell was the bogeyman whom Rowland had introduced to upset their discussions. Normally, Rowland is the most discreet of businessmen who eschews personal publicity and deals only with a few trusted journalists who can be gently controlled. Yet on this occasion every newsroom was informed that, at 9 a.m. on the day the directors were meeting, Rowland had invited Maxwell to breakfast at Claridge's Hotel in Mayfair. Not surprisingly a large crowd of journalists and cameras were waiting on the pavement as the German and Czech multimillionaires, who both delight in speaking with impeccable English accents, stepped on to the street. Rowland stood slightly back smiling as Maxwell went to the cameras. The talks, Maxwell said, were 'productive, positive and pleasurable', and ‘I am keen to buy' the paper, although there were still a few obstacles. Everything could be settled within a day. Rowland then stepped forward: 'We had a good long chat and Bob tells me that he is very keen to buy.' It seemed to confirm that morning's Daily Mirror headline, 'Maxwell set to buy Observer’. Still smiling, Rowland stepped into his Rolls and sped off to meet the independent directors. Maxwell went back inside the hotel, his temporary headquarters since striking printers were in the second week of occupying Maxwell House in protest against his policies. By the following day, it was all over. Rowland had accepted a reprimand from the Observer's independent directors for his attempt to censure Trelford, and talk about selling the newspaper fizzled out as fast as it had arisen. Using Maxwell as a threat had been unproductive and he was soon forgotten by Rowland. If Maxwell felt exploited, it barely showed. Players in the big league expect to be treated in the same way as they treat others.
Yet Maxwell's fortunes had rocketed during that year. The price of BPCC shares had risen from 12p to 160p since his takeover and Pergamon was reporting 'record' profits. Maxwell had both money and a reputation and now he wanted the power and influence which he believed came automatically with ownership of a newsp
aper. In May, Maxwell had telephoned Carpenter about the sale of the Daily Mirror: 'I'm about to invest in the Express’ he confided to a man whom he had known since the 1950s, 'but I won't if there's a chance that I can buy the
Mirror. Can you give me any encouragement that I might?' Carpenter replied that he could not. On 22 June Maxwell paid approximately £16 million for 10 per cent of Fleet, the owners of the Express, who were known to be unhappy owners of the fading Beaverbrook empire. It was, Maxwell said, 'a stake for the future'. Over the following week, everything changed. Maxwell heard from a senior Mirror executive that there was strife among those planning the group's flotation, especially between the Reed executives and Thornton. The suspected presence of Maxwell's mole inside the Mirror camp would become part of the saga's folklore.
On the ninth floor of the Mirror building, Thornton was disputing Warburgs' low assessment of the group's potential value and insisted that the company be sold for £100 million. Higgs advised Jarratt and Carpenter that both the high price and the 15 per cent limit would endanger a flotation, and with the additional union problems they could not expect any serious investment. 'Warburgs told us to pull back. We were going to flop,' recalls one of the Reed executives. Maxwell heard about that terminal warning and on Sunday morning, 1 July, telephoned Carpenter at home: 'I am going to make a bid for the Mirror. Can we meet?' To stall Maxwell, Carpenter resorted to a well-used excuse: ‘I'm sorry, I don't discuss business on Sundays.' Early on Monday morning, Maxwell telephoned again. Carpenter told Maxwell that the group was not for sale to a single bidder and that they could not meet. Just to be in his presence, Carpenter knew, would start the slide into his clutches. But the rejection was too polite to have any effect. The following day, Tuesday, Maxwell sent a letter to Jarratt outlining his offer and ending with the assurance that Jarratt had ample time for consideration. There was, however, no advantage for Maxwell in uncharacteristically restraining himself. The very next day, 4 July, he called a press conference and issued a public statement that Pergamon had made 'a formal offer of not less than £80 million cash for Mirror Group Newspapers. If justified by the financial and other information on the group, Pergamon will increase its offer to a sum not exceeding £100 million.' After adding that he had given assurances about the papers' future prosperity and . . . political line', Maxwell concluded:
Some people may call me a predator but it is the proposed public flotation which will expose the group to the laws of the jungle. I regard myself as the saviour of the group against the heavy commercial advantages of its rivals. Mr Molloy, Editor of the Daily Mirror, has said in a recent article in the Guardian that 'The Mirror Group has lacked the kind of autocratic player who can take his seat in the Fleet Street poker game.' If Pergamon succeeds, then, as Mr Molloy and all his colleagues must wish, power will once again truly return to the ninth floor at Holborn Circus.
Jarratt and Carpenter were not surprised, but Thornton was afraid and arranged to meet Carpenter that night. Thornton had always suspected Maxwell as a potential buyer and, on his second meeting with Carpenter a year earlier, had asked why Reed did not sell the Mirror to the publisher. Carpenter had explained that Maxwell had shown no interest. Three times during that last year, Maxwell had contacted Thornton with offers to print the Mirror but had been brusquely rejected. An element of paranoia had entered Thornton's feelings after Charles Williams, the chairman of Ansbachers, who were Maxwell's original merchant bankers, had visited Thornton to discuss the flotation. Williams had claimed he was representing the Labour Party's interests, but Thornton feared otherwise, though Williams denies that those fears had any justification. But on 4 July the threat of Maxwell had become a reality and Thornton was afraid that Carpenter would be attracted by a guarantee of £80 million instead of risking the flotation. The only obstacle to taking the money immediately was Jarratt's public pledge not to sell to a single bidder. 'I was sure that Carpenter wanted to sell to Maxwell immediately,' says Thornton, 'but Jarratt felt bound by his honour.'
Over the next four days, while Thornton laboured under intense pressure to finalise the prospectus, Maxwell bombarded the Reed board with phone calls, letters and telexes demanding meetings and issuing ultimatums. He was met by silence. 'We refused to take any of his phone calls,' says one Reed executive,
'but you could feel his presence everywhere.' As connoisseurs of Maxwell's style, Jarratt and Carpenter knew that it was precisely the effect which he intended. On 8 July, Maxwell sent Jarratt another telex, except that on this occasion Jarratt had already read the message on a news agency tape. The £80 million cash offer, said Maxwell, was completely unconditional and could be increased to £100 million. More phone calls and telexes with deadlines followed - 'It felt like a bombardment' - but Jarratt and Carpenter refused to be drawn. Two days later, Jarratt read on the agency tapes the contents of another letter which Maxwell had sent. The offer had been raised to an unconditional £100 million cash with another £20 million available. Jarratt once again rejected the offer, but Maxwell refused to take no for an answer. 'They've not turned down my offer; they can't turn down my offer,' he told Channel 4 News. Inside Reed House in Piccadilly, Jarratt was perplexed: 'He just won't go away.'
Thornton felt more intimidated than most. His Daily Mirror horoscope for 9 July read: 'Unless you have written guarantees and solid promises, then leave financial matters alone for a while. Others may seems plausible and reliable, but the chances are that you are being manipulated in some way or worse.' Clearly the ninth-floor mole, he felt, was telling him something.
To exert more pressure, Maxwell had revealed as an aside in his letter to Jarratt, which was released to the press, that Derek Higgs of Warburgs had spoken to Maxwell's banker at Hill Samuel. He went so far as to accuse Warburgs of failing in their duty to represent Reed in a proper fashion. To the casual reader that mention would be unimportant but on the City grapevine everyone knew the significance. Warburgs had never hidden their distaste for Maxwell, whom they dubbed a despot, and would have preferred to have no dealings with him whatsoever. Even if his accusation were untrue, everyone inside Reed's barricade realised that it was a valid ploy to compel them talk to Maxwell; once the discussions began, it would be difficult to withdraw. Thornton became alarmed about his employers' growing instability. 'Both of them looked nervous but again assured me that they would never sell to Maxwell. What could I do other than believe them?'
Warburgs' doubts were influencing the two Reed executives. They were worried about Thornton's failure to control the unions, whom the City universally regarded as gangsters and a risk to their investment. To counter that sentiment, Thornton summoned the unions on Wednesday 11 July. For three hours he explained that he needed a no-strike guarantee or else Maxwell would be their new employer. Both Bill Miles and Keyes suddenly forgot their disdain for Thornton and agreed. Only the NGA withheld their support, because ironically they could not believe that Jarratt would break his pledge. Without a unanimous guarantee, Thornton had nothing new to offer when he telephoned Carpenter late that afternoon and was told that Maxwell was tightening the screws.
In their Piccadilly headquarters, the two Reed executives had just heard that they had a new neighbour. Across the street, in the Ritz Hotel, Maxwell had rented a suite, 'so that I can be closer to be of assistance to you', he told them. Both men felt the noose tightening and had reluctantly agreed that Warburgs could send Maxwell some draft agreements but strictly 'without commitment'. Like a Don Juan seducing a woman, Maxwell knew, as the first resistance disappeared, that it was just a matter of delicate tactics before all the defences began to crumble. He was on the verge of becoming a press baron. Only Jarratt and his conscience blocked his way.
Neil Kinnock, the Labour Party's leader, was delighted by Jarratt's conscience. The Mirror Group's traditionally pro-left position is considered crucial to the party's very survival, since its millions of readers are the bedrock of its electoral support. During every election, the Mirror's coverage is scrutinis
ed for the slightest hint of criticism. Kinnock was convinced that Thornton's plan was the best guarantee for the continuation of that heritage and that Maxwell's bid was not in the party's interests. Convincing the Labour Party that they could trust him was vital for Maxwell if he was to persuade Jarratt to break his undertaking.
On Wednesday 11 July, Maxwell drove to Hampstead in north-west London. He had telephoned Michael Foot, the former Labour Party leader, and invited himself to lunch at the left-winger's home. Maxwell was politically estranged from Foot and the two had spoken only rarely over the past twenty-five years. But Foot was grateful to Maxwell for contributing £38,000 in 1983 towards the legal fees for a High Court action against the Boundary Commission's recommendations for the redrawing of constituency borders which would deprive the party of thirty seats in the House of Commons. More recently, Foot had hosted a lunch for Maxwell at the Gay Hussar restaurant in Soho to discuss the possibility of a new left-wing paper. Maxwell, whose mind in such matters resembles a ledger - 'I owe you, you owe me' - wanted Foot's support for his bid.
