City: Trafalgar battle

Given the lambasting Trafalgar House has received in the City (and this column) over the past year, it is not always easy to remember that it was once widely seen as one of Britain's outstanding post-war entrepreneurial achievements. From tiny beginnings dabbling in the Kensington residential property market, Sir Nigel Broackes and his long-standing partner, Sir Eric Parker, built it into the world's fourth-largest international contract engineering business with substantial property interests and some world-class brand names - the Ritz Hotel and Cunard shipping - tacked on for decoration. Then came a series of strategic blunders, recession, an appallingly timed rights issue and acquisition, questions about the company's accounting methods and management acumen, and finally last week, in the form of the brothers Henry and Simon Keswick, the inevitable corporate raiders - expatriate Britons from Hong Kong - riding high on the boom economies of the Far East.

Through one of their satellite companies, Hongkong Land, the Keswicks have snapped up 15 per cent of Trafs at 85p a share. They will probably get the other 15 per cent they are tendering for this week with equal ease. In a way, the Keswicks are just what long-suffering investors in Trafalgar House have been asking for - aggressive, successful and ambitious outside shareholders to ginger up the company's management and release the value of its underlying assets.

But beware. The Keswicks have a distinctive style of corporate structure and management, one that may not be wholly suited to the British scene. Many of their companies are only minority owned. That does not seem to stop them treating them as if they were wholly-owned subsidiaries. In all their companies, the Keswicks call the shots. If Henry Keswick says jump, the individual managers always do, even if the Keswicks only control 30 per cent.

Frankly, I can't see either Sir Nigel Broackes or Sir Eric Parker dancing to Henry Keswick's tune. Despite all the wounding City criticism, they retain their pride. Sir Nigel is in any case deeply offended by this out-of-the- blue raid. He knows Henry and Simon Keswick well, likes and respects them, and jointly owns a construction company with them in Hong Kong. At a recent meeting, they expressed an interest in buying Trafalgar's London hotels (they already control Mandarin Oriental), but they never even hinted at wider designs on the company.

If the Keswicks get their 30 per cent, Sir Nigel and Sir Eric will almost certainly go. That is what many institutions have been calling for anyway. There is hardly any loyalty left among investors in Trafalgar House. Anything seems better than the present malaise. The Keswicks rightly calculate they will have little difficulty in securing backing for the new against the old. But whether this is the right course for Trafalgar House is another matter. The danger is that the Keswicks' narrow business interests - we don't yet know what they want to do with Trafalgar - will not always coincide with those of other shareholders.