‘We’ve got an amazing statement,’ Gerrard told me after taking down this story. ‘We could build a court case around her alone.’
To drive the point home, I wrote to Sir Colin Marshall the day after ‘Violating Virgin?’, 28 February 1992, and asked him to reconsider my letter to the nonexecutives of 11 December 1991. I pointed out:
Given the haste of your reply, I take it that you did not have sufficient time within which to investigate the matter. There have been numerous further independent reports in the media on this subject which have all supported the complaints that Virgin have made, culminating in the broadcast on ITV last night of the This Week television documentary. This Week have independently uncovered many more facts which go to prove that our allegations are totally correct. The content of the programme speaks for itself and in fact confirmed that the problem is even more serious and deep-rooted than we originally thought. The least your shareholders can now expect is a full and proper explanation as to what exactly has been going on within British Airways and of the activities of Mr Brian Basham and those to whom he reports at British Airways.
I asked him directly whether he would now intervene:
I should now like from you in your role as deputy chairman and chief executive of British Airways a clear assurance that you will make certain that the activities that have been highlighted will immediately cease and that you will give a clear apology.
Well, I thought, it wasn’t too late – just. But he’d better make sure that his apology was a good one.
I was up in Kidlington on Friday when Will rang me.
‘Richard,’ Will said. ‘I’m in a call box. I’ve just landed at Gatwick and I’ve picked up a copy of BA News. The front-page headline says, “BRANSON ‘DIRTY TRICKS’ CLAIM UNFOUNDED”. They’re calling you a liar.’
Will had been on a skiing holiday when the programme was broadcast. The dates of both the programme and his skiing holiday had been changed several times so that they didn’t coincide, but as luck would have it they still did. Since so many people were calling us, I had asked Will to come back to manage the PR storm which was brewing. In response he had just landed at Gatwick.
The BA News article went on to say:
Thames TV’s current-affairs programme This Week last night devoted its programme to Richard Branson’s allegations of ‘dirty tricks’ by British Airways against Virgin. British Airways was invited to take part but declined after careful consideration for reasons explained to Thames’s producer Martyn Gregory in full in a letter from Mervyn Walker, legal director.
The rest of the article reproduced the letter from Mervyn Walker which accused Thames Television of falling into my publicity trap and said that BA would not be ‘provoked into playing Mr Branson’s futile game and must therefore decline to take part’.
‘What a load of bollocks!’ we said together. ‘They’re calling me a liar and this is libel.’
It was the last straw. Will faxed me the article from Holland Park. We tracked down Gerrard, who immediately agreed that they had libelled me. Suing BA for libel would be a far easier case to bring to court and make clear to a jury than a highly complicated case about BA abusing its monopolistic position at Heathrow. It would also push everything out into the open.
On Monday morning I discovered that Lord King had written personal letters back to any viewers who had written in to question him about British Airways’ dirty tricks, and he’d assured them that there was no truth whatsoever in my allegations. In effect, it was the same libel repeated, and once again to members of the public. I decided that I should sue Lord King as well.
That morning, I also received a letter from Sir Colin Marshall. He called my accusations ‘unjustified’, said he had nothing to add to his previous letters to me, and asserted that the allegation of a ‘dirty tricks’ campaign was ‘wholly without foundation’.
I stared with amazement at the letter. Perhaps Sir Colin Marshall had been unable to watch ‘Violating Virgin?’ Perhaps he had been stuck in a traffic jam or on board a delayed flight. Perhaps he remained blithely unaware of what was going on in his company. If so, it seemed very odd: by reputation Sir Colin Marshall was a workaholic, a man who was obsessed with detail, who knew every single thing that went on in any of the companies where he worked.
The next week the sale of Virgin Music finally overtook me.
28 Victory
March 1992–January 1993
THERE WAS £560 MILLION – $1 billion – on the table, but I didn’t want it.
‘They need to know by 2p.m. this afternoon,’ John Thornton told me. I rang off and looked across at Simon and Ken. We had spent the last twenty years building up the company but nothing had prepared us for selling it.
In many ways the signing of The Rolling Stones was the culmination of everything I had ever wanted to do at Virgin Music. We had been fighting to sign them for twenty years, and now at last we had the greatest rock and roll band in the world on our label. From being a start-up label back in 1973 that had relied on the genius of Mike Oldfield, we had now come of age: now we were the label of choice for many of the world’s biggest bands. Artists had seen how we had launched Phil Collins’ solo career, and how we promoted UB40 and Simple Minds, what we had been able to do with Culture Club and Peter Gabriel, and they wanted to sign with us. But, just as we reached this height, it was over.
‘Ken?’ I asked.
‘It’s your call,’ he said.
‘Simon?’
‘Take the cash. You’ve got no option.’
Whenever anyone tells me that I’ve got no option, I try to prove them wrong. Over the last few days Thorn EMI’s offer had changed from an all-share offer, which would have left me as the largest shareholder in Thorn EMI with 14 per cent, or a lower cash alternative, to a higher cash offer. Even though Thorn had now switched tactics and was offering more cash than shares, I was more attracted to the share exchange since it would mean that I could keep a stake in Thorn EMI which I might use in the future as the basis to bid for the company. The difficulty was that everyone told me it would be too risky to use this stake as security to borrow any more money to support Virgin Atlantic. Shares in Thorn EMI were not seen as a cast-iron security. Although I had already drafted a letter to the staff explaining that I was going to take up Thorn EMI shares and so keep an interest in the company, I reluctantly had to change my mind and go for the cash offer.
Before finally agreeing, I called up Peter Gabriel and broke the news to him. I wanted his advice, and I was also aware that the sale would affect his career.
‘Don’t do it, Richard,’ he said. ‘You’ll wake up one night in a cold sweat and wish that you’d never done it. You’ll never get it back again.’
I knew that he was right. It was exactly what Joan had been saying. But the pressure from BA was too great. By now I felt so sure that Lloyds was going to foreclose on us that I had no alternative. I was also aware that Simon wanted to sell, and that he wanted to take cash rather than prolong his involvement with the Group by taking shares. If taking shares in Thorn EMI would prolong the agony at Virgin Atlantic, then it would defeat the whole point of the exercise. My overriding objective was to save Virgin Atlantic from going under, and – cruelly – the only reason I was selling Virgin Music was because it was so successful. If I sold Virgin Music, the Virgin name would be saved. Rather than having one struggling airline and a record company, there would be a secure airline and a secure record company, albeit owned by Thorn EMI. And, although I knew that Simon would leave it, I could stay on as president of the company. Most importantly, Ken was going to remain in charge of Virgin within Thorn, and he would safeguard the Virgin reputation.
I called up Trevor, who confirmed the bank’s line:
‘Cash is the only choice,’ he told me. ‘It means that we can pay back all the debt and start afresh. It’ll give you complete freedom. And, when thinking about Thorn shares, remember what happened in the stock-market crash.’
That made up my mind. If I took Thorn shares and they fell dramatically in value, I could be powerless to stop the bank moving in. Sir Freddie Laker had reminded me how it happens so fast that it takes your breath away. Rather like Virgin, his airline had fought a long battle against British Airways and, just when he needed their support, the banks pulled in their loans. He was invited in to see the banks, expecting them to agree to a small increase in his overdraft on the back of an expected boom the following year, but when he arrived he was shown into a side room. Nobody came to see him for thirty minutes. Finally, he managed to get hold of the bank director, who then invited him up to another room. One look at their faces as he walked in made him realise that something terrible had happened.
‘We’ve put Laker Airways into receivership,’ they told him.
It was all over. There was nothing Sir Freddie could do to prevent the receivers from sacking all the staff, changing the locks on the buildings, confiscating all company property, leaving passengers stranded and handing the planes back. The Laker check-in desks at Gatwick vanished overnight and the sales desk stopped taking bookings. The telephones were unplugged and a lifetime’s work disappeared in six hours. It was Sir Freddie’s experience which more than anything else made me hold back from pushing the banks too far. Once I let them take control, Virgin Atlantic would be finished. It would be scant consolation to know that $1 billion had once been on the table.
Obstinate as I am, I recognised that there is a time to back down. ‘Live for the present –’ I heard my parents’ old maxim in the back of my head ‘– and the future will look after itself.’ My instinct for continued involvement with Virgin Music and taking Thorn EMI shares was tempered by the need for financial security. John Thornton, who was advocating that I should take the shares, did not know the whole picture; nor did Peter Gabriel, who was arguing that I shouldn’t do it at all. And so, pushing Virgin Music into the past tense, I picked up the phone and called John Thornton at Goldman Sachs.
‘I’ll take the cash,’ I heard myself say. ‘I’ll leave the rest to you.’
‘Fine,’ he said. ‘The lawyers are on their last round now. I’ll call you when it’s time to come over.’
Although I had saved the airline, I felt that I had killed something inside me. Looking at Simon and Ken, I was saddened that we would each go in separate directions. In some ways I was happiest for Ken: he was going to stay with Virgin within EMI, and would soon be releasing records by Janet Jackson and The Rolling Stones. I had no idea what Simon would do, but I suspected that he would enjoy a quieter life. I knew that, as soon as Virgin Music had gone, I would have to come back out of the corner and slug it out with British Airways. I’d already lost count of the rounds we had fought and was beginning to feel punch-drunk and exhausted.
We had to wait before signing contracts, since Fujisankei, our 25 per cent shareholder, had a pre-emptive clause that allowed them to match any offer for Virgin Music. We also had to decide whether to accept Thorn EMI’s offer of £510 million in cash and taking on Virgin’s debts fixed at £50 million; or £500 million in cash and whatever debts were in the company at the date of completion in four weeks’ time. Although we had to continue to run Virgin Music in the normal manner, Ken felt sure that by completion the debt would be smaller.
‘There are some good sales going on at the moment,’ he said. ‘Let’s take all the money now.’
And so we opted for £510 million plus £50 million of debt in Virgin Music. In the event Ken was right (as always!) and we earned an extra £10 million by choosing this option. In the meantime, we had to wait until 3a.m. before Fujisankei finally threw in their lot with us and opted for Thorn EMI’s cash. We signed contracts as dawn was breaking. The next morning Thorn EMI announced the purchase of Virgin Music for exactly $1 billion – or £560 million.
Simon, Ken and I went to see the staff at our Harrow Road offices.
‘It’s like the death of a parent,’ Simon said to me as we went inside. ‘You think that you’ve prepared for it, but when it happens you realise that you’re totally unable to cope.’
I felt that it was more like the death of a child. Simon, Ken and I had started Virgin from scratch, kept it going through all the times when it looked as if it was coming to an end, and reinvented it with every generation of music so that it continued to be the most exciting record label in the business. While other record labels such as Apple still symbolised The Beatles and Abbey Road, Virgin had leapfrogged from Mike Oldfield and Gong to The Sex Pistols, then Boy George, then Phil Collins, then Peter Gabriel, then Bryan Ferry, then Janet Jackson and The Rolling Stones. Throughout each era – hippie, punk, new wave – Simon’s taste had prevailed and Ken had kept everything together.
Ken now stood up and told everyone that they would become part of Thorn EMI, and that he would be staying with EMI to ensure Virgin’s independence. Simon started to speak but instead burst into tears. Everyone looked at me. I stood up, on the verge of tears myself. It was no good. I was in an impossible situation. I couldn’t tell them the real reason why their company had been sold. If I told them the truth about the bank’s attitude to Virgin Atlantic, then the airline and the rest of the Virgin companies would be damaged by lack of confidence. Airlines are all built on confidence, and an admission of weakness would scare away passengers. And so, hating myself for appearing to have cashed in, I stood there and offered everyone a job at Virgin Atlantic if they were unhappy with EMI, and assured everyone that Ken would look after them. When Jon Webster proposed a vote of thanks to me, Simon and Ken for ‘the best years of our lives’, I could bear it no longer. I left the room and set off at a sprint down Ladbroke Grove, tears streaming down my face.
Oblivious to the stares of passers-by, I must have run for almost a mile. When I passed a newspaper stand I saw an Evening Standard poster that should have dried the eyes of most grown men: ‘BRANSON SELLS FOR £560 MILLION CASH’. I ran past it, tears still streaming down my face, and somehow made my way home. Joan was out, so I went into the kitchen and put on the kettle. It was a cold March morning, but the cherry trees at the end of the garden and in Holland Park were just beginning to blossom. As I stared outside, a fox broke cover from the hedge and trotted across to the back door, where Joan left out scraps for it. It picked up a chicken carcass and then turned on its heel and vanished into the undergrowth. The last photograph I had seen of Lord King had shown him on horseback, resplendent in full hunting gear.
‘Feeling thoroughly depressed,’ I wrote in my notebook about my decision to go for cash rather than shares. ‘Decided to go for the conservative route for the first time in my life. All my advisers (bar John Thornton) were advocating it.’
As well as picking up an extra £10 million by choosing the fixed-debt option, Ken also gained us another £9 million profit over the currency transfer to Fujisankei. Thorn EMI paid us the £510 million in cash, of which we had to pay £127.5 million to Fujisankei. Fujisankei wanted their money in yen, so we had to change it. We had a month’s grace between taking the money and passing it on at completion on 1 June. We had to choose when to switch into yen. Simon and Trevor wanted to do it immediately so that we all knew where we stood. Ken and I were a little more relaxed and inclined to gamble with it. We kept it in sterling and, as luck would have it, sterling appreciated against the yen. We let it run and changed it at the last moment, earning ourselves a further £9 million profit. Nothing like a bit of luck!
And so the crisis was resolved. From the original cash purchase price of £510 million, Fujisankei received £127.5 million, and we received more than £390 million. Simon and Ken took their share of the proceeds and went their separate ways. I used my proceeds to repay the bank and invested the remaining cash in Virgin Atlantic. Rumours about Virgin Atlantic having to pay for fuel in cash were now well and truly scotched. We had more disposable cash than British Airways.
The banks immediately started calling me with renewed impatience – no longer to demand their money back, sinc
e we had returned their debt to them, but to offer to put my funds in high-interest deposit accounts, offshore accounts; to invest it; to invite me for lunch; to do some kind of business with me; and – of course without seeing the irony – offering to lend me as much money as I wanted to finance any future deals!
It took a while for me to understand the implications of the sale. For the first time in my life, I had enough money to fulfil my wildest dreams. In the immediate future I had no time to dwell on this, because that very week the British Airways story took a turn that occupied all my attention. In some ways I was pleased that I didn’t have time to think about the sale of Virgin Music. I hate living in the past. I particularly didn’t want to think about all the lost friendships. But the weight had been lifted from my shoulders and at the back of my mind I was aware that the Virgin Group was now free to develop in whichever direction we chose. Virgin Music may have gone; Ken and Simon and I had split up; but the best was yet to come.
‘Penni,’ I asked, ‘please can you give me Freddie Laker’s number in Miami?’
I dialled the number.
‘Freddie,’ I said. ‘It’s Richard here. I’ve decided to take your advice: I’m suing the bastards!’
‘Go for it!’ said Freddie.
* * *
As we embarked on the court case, the single thing that I had to keep reminding myself was that this was a libel case, not an argument over business practices. I had to clear my name.
Marshalling the evidence happened in three stages: we had all our own evidence which we already knew; we received a vast collection of documents from British Airways under the rules of legal disclosure; and a great deal of evidence began to materialise from disillusioned British Airways staff. It was this evidence that was the most powerful.
Losing My Virginity: How I Survived, Had Fun, and Made a Fortune Doing Business My Way Page 34
