23 March 2010

A £1.5 billion Shopping Spree – No, Not J !

I bet you don’t think about it. You wander around, eating in nice restaurants, flying around the globe, staying overnight in a hotel or spending money in shops completely oblivious to the fact that the businesses you’re giving your custom to, are owned by some other entity, in many cases, a bank.

Eat in one of Sir Terence Conran’s restaurants and you’re giving your money to Lloyds Bank.

Stay or eat at the Grosvenor House in London’s Park Lane (pictured) and you’re boosting the profits of its rival, the Royal bank of Scotland.

Go to the pictures in a Vue cinema or shop in House of Fraser and you’re again giving your money to Lloyds Bank. Lloyds even also own Rangers Football Club in that they provided the finance to the guy who owns 96% of the shares – if his business was to fold - aaagh! On the same basis, RBS own Liverpool Football Club in that if the American owners ever default the bank will take over the shares.

But then again on a secondary level, if you’re a Royal Bank of Scotland or Lloyds or Northern Rock account holder, not only are you boosting the Government’s coffers every time you pay a charge to the bank, every time you shop, eat or ‘Vue’ you’re adding to the bank’s profits and hence the Government’s revenues, given that they own 47% of Lloyds and 84% of RBS.

Fly British Midland and you’re actually flying with German airline Lufthansa who own the British company. Have a holiday at Centerparcs and your money goes to an American finance house.

And over here in France if I shop at the local Darty TV shop I’m giving my money to Comet, that well known UK company. Similarly, if I buy something in the Castorama DIY store, I’m actually shopping at the UK chain, B&Q who owns them.

There are lots of examples where a well known company you purchase from is actually owned by unknown entities, in many cases anonymous finance houses, but rather more public is Halifax Bank of Scotland (HBOS to you and me) which takes the biscuit with the largest, most diversified portfolio of non-bank companies. This is one reason why HBOS nearly bankrupted Lloyds who took the Scottish Bank over when the UK banking crisis was at its height.

In a spending spree lasting several years (J, eat your heart out), HBOS (probably the Bank of Scotland bit – we’ll spare Halifax) not only purchased the Vue cinema chain and House of Fraser stores but also Caffé Nero, David Lloyd Leisure clubs, McCarthy & Stone the housebuilders and Crest Nicolson, the commercial premises specialists. The spree ended up with HBOS owning some 80 companies outright but with significant stakes, across Europe in another 900 companies.

This portfolio, bought at the top of the market is now showing losses running into hundreds of millions but predictably, the guy who ran it disappeared off into the sunset, following years of receiving a multi-million pound salary. Oh and his pension was nearly as much as the pilloried, RBS CEO, Fred Goodwin.

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