by Tom Bower
Credibility was Maxwell's problem. To deflect the weakness, he placed even more emphasis on personal appearances, especially alongside the great and the good. With his personal photographer in attendance as he ceaselessly flew around the world in a private jet, he arranged that after concluding contracts there would be a meeting and a photo opportunity with the country's prime minister or president. After television rights in France, Spain, Portugal and China had been secured, the photographer was present to record Maxwell shaking hands with President Mitterrand and the other national leaders. But
* Pergamon remained the third-largest scientific publisher after Springer.
the appearances were misinterpreted as designed to boost his ego rather than confirm his importance. In a supreme effort to overcome the doubters, his new brokers, Alexander, Laing & Cruickshank, published in September the first detailed analysis of BPCC. Its author was Henry Poole, who two months earlier had completed the issue of new BPCC shares worth £630 million which had powerfully enhanced Maxwell's kitty for another Harcourt Brace-type purchase.
Poole's report was called 'Unravelling the Melmotte Skein'. Melmotte was a character in Trollope's novel, The Way We Live Now, who though a tower of strength was thought by many to be built on sand. Like Melmotte, Poole suggested, Maxwell had suffered every wrongful accusation. The report, which Poole calculated took an average ninety minutes to read, reaffirmed its author's verdict at the company's June annual general meeting that Maxwell's empire was built upon secure foundations. To accept Poole's argument depended upon the reader's faith in Maxwell personally. No less than half of the anticipated pre-tax profits for 1990 were grouped in a column marked 'Other'. The understanding was that besides the profits to come from Pergamon's 'Orbit InfoLine', the computerised patent index and scientific information service and acquisitions, BPCC would earn over £100 million in one year from speculation on the world's stock markets and currency exchanges. Seasoned Maxwell watchers looked askance and reflected that no less than half of the £630 million raised in what was claimed to be the second largest rights issue in the city was in fact contributed by Pergamon. Citing Melmotte rather gave a hostage to fortune, but the brokers were apparently content to risk their reputation on the claim that their major client would create a £5 billion corporation by 1990.
On 25 September the new vehicle for that spectacular growth was revealed. BPCC, if was announced, was changing its name to Maxwell Communications Corporation. The name BPCC, said Maxwell, was confusing for a company which engaged in so much more than just printing and was spread worldwide. He wanted to be shed of the image of 'dark northern printing halls'. Peter Jay, his chief of staff, told the Financial Times:
'People said: We have read about you. We all know about you. For God's sake, even if it is personally embarrassing, you have got to get your name in the name of the company.' So Maxwell agreed, explaining, 'It's not an ego trip. I don't go in for ego trips. It's not my style. It was a decision reluctantly taken. I was forced into it by my colleagues.' Four weeks later a new eight-page glossy colour bulletin was published by Maxwell Communications to publicise the corporation's latest achievements. Maxwell's photograph appeared posing in nine different locations including one captioned, 'Robert Maxwell discussing world affairs with Henry Kissinger in Tokyo'.
Maxwell warmed to Henry Poole's suggestions that he enjoyed 'an acute sense of vision'. His detractors observe that Poole's 'reality of the vision' was merely a rapacious appetite to buy and become 'big'. Most of the new assets were established printers and publishers. Some deals, such as the purchase of a compact-disc manufacturer, defy logic but could produce profits. Other deals, like the attempted purchase of Watford Football Club, would seem not only to have catered to his love of the sport, but also to have raised fears he might be interested in the potential land value; and Maxwell had an idea that when British soccer ceases to cater almost exclusively for the working classes and can attract the middle classes, as football does in America, it will be profitable. At Watford, his ambitions were stymied. The Football League in January 1988 blocked his takeover bid until he and his family interests divested themselves of their other interests in Oxford United, Derby County and Reading. Maxwell accepted their ruling with a minimum of complaint. His real businesses demanded attention and the City was again puzzled by the absence of any evident strategy. In late September 1987 he had announced the purchase of stock in an assortment of companies, banks and retail stores. A baffled inquirer on Thames Television's 'City Programme' asked Maxwell on 24 September to explain his motives. 'The rationale,' he replied curtly, 'could not be easier - to make money.' The stock market crash three weeks later, on 19 October, affected that ambition in Britain at least although he was noticeably reluctant to admit his losses. Instead he told several newspapers that he had astutely avoided the crash by selling his equities and buying safe government bonds. He did not contradict The Economist [14 November 1987] who therefore concluded that he still retained £500 cash and boasted to the Wall Street Journal: 'Now cash is king and I've got the cash.' The truth would emerge later. His behaviour was reminiscent of the past and the familiar pattern reappeared in a deal which was concluded at an extraordinary general meeting on 31 December 1987. It was one of the most peculiar in Maxwell's history. On 14 December, MCC had circulated to its shareholders a proposal to buy from Pergamon three companies - Orbit InfoLine, Molecular Design, an American data system for chemical information, and Pergamon Books. (There was also a separate transaction to purchase some property in New York state.) The initial price for what were called the 'Acquisition Groups' was £56 million in cash; but a further £15.3 million would be payable during 1988 if the companies' combined profits for 1987 exceeded £4 million, and an additional £28.7 million would be paid if 1988's profits exceeded £7.5 million. In all, the price could total £100 million. The proviso on profits was significant because in the first eight months of 1987 Orbit InfoLine and Molecular Design had earned a mere £579,000, although according to the prospectus this would increase substantially in the last quarter. (Pergamon Books had actually made a net loss.) Nevertheless, one stark fact was highlighted. Orbit's profits would have to increase substantially in just two years to produce the £100 million pre-tax profits forecast by his brokers three months earlier. Molecular Design had been purchased by Pergamon only three months earlier and few public corporations would hold special meetings on New Year's Eve or on the very last day of its accounting year to approve a take-over except for a special reason.
In the prospectus, MCC's board stressed that it 'engaged Bankers Trust to provide an independent valuation' of the three companies and that the Trust had stated that they were worth 'between £70 million and £107 million'. The MCC board had decided to pay £100 million if the profits came in on forecast. Yet the valuation report supplied by Bankers Trust showed that their scope for independence was severely curtailed by Pergamon: 'The estimates of sales and earnings for the years 1987 and 1988 have been prepared solely by Pergamon. No independent accountant has expressed an opinion on these estimates. Furthermore, we have not independently verified the financial results of the Acquisition Groups.' In other words, the public company was buying assets from the private company on faith that the latter's valuation was accurate. Moreover, although most of the Acquisition Group's trade was based in America, the conversion rate to the pound adopted for the purchase was $1.83 while the conversion rate for the profits was $1.60. Yet the actual conversion rate at the end of 1987 was $1.86. Since MCC was paying in sterling, the deal seemed unsatisfactory to some in the City.
Shortly before 10 a.m. on New Year's Eve, a collection of journalists gathered at the Mirror building to witness the meeting. Since Maxwell was faced with a conflict of interest, he was automatically deemed ineligible to exercise his 51 per cent shareholding in MCC to approve the deal. Hence it fell to the remaining independent directors to recommend the purchase as 'fair and reasonable . . . [and] in the best interests of the Company'. It was an o
pportunity for the minority shareholders to voice their opinion. But, to the journalists' surprise, they were barred by security guards from entering the conference room and asked to leave the building. Maxwell, the self-publicist, was not only shy but positively irate at the scepticism with which some had looked on his latest deal. The press, said Maxwell, were 'ignorant and stupid' and were 'unjustified' in spreading 'misinformation'. Inside, within five minutes, the deal was approved without dissent even from the few pension fund managers who had earlier intimated their dissatisfaction. All that remained was for Maxwell to announce his plans for the future - to relaunch a London newspaper to be called The Londoner; to launch a Europe-wide middle-market colour newspaper; and the possible purchase of Murdoch's lossmaking New York Post. None of these ventures would produce any profits in the foreseeable future and would just slightly add to MCC's size. 1987 closed with a cloud and a whimper rather than the bang he had anticipated.
15
Fury fuelled by frustration galvanised Maxwell as he sped from the disagreeable press conference towards the sanctuary of his private quarters adjacent to the Mirror tower. While most Londoners were contemplating the New Year's Eve revelries and the drowsy aftermath, Maxwell barked orders to summon a meeting of advisers for early the following day, regardless that it was a holiday. The subject for discussion was to be Maxwell's television interests, or to be more precise, his setbacks to fulfil the aphorism immortalised by the Canadian press baron Lord Thomson that a stake in TV was 'a licence to print money'.
Maxwell was irked that Rupert Murdoch had established, albeit at great cost, the Sky TV satellite channel and Fox TV, the network which spanned the USA as a rival to the Big Three. The Australian's achievement underlined the unreality of the new name - the Maxwell Communications Corporation. Inserting 'Communications' was possibly a statement of future intentions but was certainly not yet a fact. MCC was an established printer and also a publisher of information, but only of small circulation scientific tomes; MCC was not yet a mass media communicator. Even if MCC 'bought' all the interests owned by his Liechtenstein-based Pergamon Holdings - Mirror Group Newspapers, a 20 per cent stake in Central Television, a 12.5 per cent stake in TF1, French TV's channel one, its shares in MTV Europe and Premiere (both loss-making music and film satellite channels), and an insignificant British cable TV network - MCC could still not stand among the ranks of 'the ten global media' barons by the end of the decade. Consequently, on New Year's Eve 1987, Maxwell was searching for new acquisitions to fulfil his public pledge and triple the size of MCC within the following two years.
All four men who obeyed Maxwell's summons - his office manager Peter Jay, Peter Laister, a non-executive director, Patrick Cox, recently hired to rationalise and manage all Maxwell's television interests, and Geoffrey Smith, formerly of Thames TV - sat expressionless as their employer speculated about where he should pounce for new prey. Unknown to them, Maxwell had already instructed Robert Pirie, the chief executive of Rothschild Inc. in New York, that Macmillan, the American publisher, should be prepared as a possible new target - the hitherto elusive 'Big One'. But those present on New Year's Day knew that Maxwell's bids to seek admittance into the common cage with other predators were often prone to rejection. They were summoned and paid to ponder one aspect of that predicament. On that day, the topic was Maxwell's cable franchises. In 1984, Maxwell had bought the small and defunct Rediffusion cable network which offered little more than the four standard 'off-air' channels. Bereft of investment, the losses had escalated. The deal illustrated a familiar pattern. Swept up in the current vogue that television, through cable and satellite, would in the future serve a massive pan-European audience, Maxwell had snapped at that opportunity like several others to stake his claim as a major player. But the rewards after three years revealed a pot-pourri rather than a strategy and there were no profits. At the New Year's Day meeting, Maxwell's plans for increased expenditure were criticised because the minuscule cable industry in Britain would never be profitable. But as usual, Maxwell was hostile to adverse advice and, at the earliest opportunity, everyone left the building to snatch the last few hours of the holiday. Unruffled, Maxwell, who would soon fly to his yacht moored in the Caribbean, once again reassessed his opportunities for 1988. Besides the Big One in America, continental Europe offered some possibilities. His forays into Germany and Italy had stumbled against entrenched national giants, but France opened up opportunities.
In the wake of his drubbing at Gauthier Villars, Maxwell had ignored France. That changed in January 1985 when Jacques Pomonti telephoned Maxwell. Pomonti, who had been appointed president of the Institut National de l’Audiovisuel in Christmas 1984, was charged to seek foreign investors for TDF1, France's proposed Frs2 billion television satellite service. Pomonti had met Maxwell in Holborn only days earlier: 'Maxwell was then unknown in France. I briefed him on the French government's new television policy and he just said, "I'll take a 20 per cent stake."' Pomonti returned to Paris particularly pleased by his success although Murdoch, despite his known prejudice against the non-English speaking world, had also agreed to consider the project. Maxwell however had spoken some French and had even mentioned in passing that his family was French. To Pomonti, the commitment seemed serious. Back in London, Maxwell had mused about the prospect.
At that time, French television was renowned, even notorious, in the media world, for stodgy programmes which were obedient to tight, centralised government control, excluding foreign programmes in the cause of protecting French culture. But in 1982 fearing that France, like neighbouring Italy, would be swamped by pirate TV stations unless there were liberal controls President Mitterrand had terminated the government's monopoly. By 1985, when the first commercial station was transmitting, the president feared that the socialists would lose the parliamentary elections in 1986. To forestall a right-wing monopoly, two more ground stations were sanctioned to start transmission within twelve months. La Cinq was awarded to the 'left-wing' Italian Silvio Berlusconi and to Jerome Seydoux, a friend of the president. It was in that atmosphere of politically motivated expansionism that Pomonti enticed Maxwell to buy a stake in France's satellite, TDF1, whose four channels, according to Mitterrand, would be divided equally between French and foreign companies.
As his relationship with Pomonti warmed during 1985, Maxwell's interest in France grew. He quickly grasped that, unlike in Britain and America, any success needed the goodwill of the head of state. Dealing with presidents and prime ministers had become a custom art for Maxwell. He prided himself on his catalogues of photographs which portrayed the business tycoon discussing world affairs with statesmen. When he therefore asked his new friend Jacques Pomonti to arrange a meeting with the president, he took it for granted that Pomonti, who had known Mitterrand for more than twenty years, could easily oblige. The most suitable date, 6 August, just happened to coincide with Maxwell's anticipated return from the Soviet Union and China.
On the appointed day, Maxwell lost little time in letting slip to the president that, after meeting the Soviet and Chinese leaders, he had flown directly from Peking to Paris and could therefore be counted among the best informed in the west. Mitterrand, who is attracted to extraordinary personalities was, according to eyewitnesses, taken by the huge personality who rattled out, in what became his standard pitch, his local antecedents: his brilliant war, his French wife and children and for the president, his lifelong devotion to socialism. 'Mitterrand', recalls one of the aides, 'sensed that there could be some benefits from Maxwell. By then we feared annihilation at the polls. The political climate was against us. We were friendless, especially among the media barons and here was a Francophile press magnate, a man who gave the impression that he was the biggest in the world, offering us, the socialists, his friendship. The opportunity was too good to miss. The mutuality of business interests - that the president wanted to privatise TV and Maxwell wanted a satellite - seemed at that moment purely coincidental.'
Once outside Mitte
rrand's office, Maxwell conferred with Jean-Claude Colliard, the director of the president's Cabinet. His friendship, he expostulated, was unconditional. Colliard, who included among his duties caring for Mitterrand's personal finances, reflected his master's pleasure. Before he had even left the Blys6e, Maxwell was already calculating the possible prizes: ‘I don't know if it's good for France,' he half-joked to Pomonti, 'but this has all been very good for Maxwell.' Over the following weeks, with Pomonti's help, Maxwell was introduced to a range of French power-brokers. In November, he hosted a dinner in London, arranged by Pomonti, to meet Berlusconi, who was negotiating to rent the satellite's second channel. 'They didn't get on,' recalls Pomonti. They were probably too similar. Nevertheless, by the end of summer 1985 Pomonti had secured their agreements.
