Lonrho: A lone stranger in Tiny's world: How mystery man Dieter Bock struck a deal for the shareholding

ONE DAY last autumn a little- known property developer, Dieter Bock, arrived in London on a highly unusual mission. He went straight to the unimpressive office in Cheapside that serves as the headquarters of Lonrho. There he met the conglomerate's controversial leader, Roland 'Tiny' Rowland, and several board members.

Mr Bock told them he thought Lonrho's shares, hovering around 70p, were undervalued and that he wanted to buy a 15 to 25 per cent stake. He had never met the daunting Mr Rowland before but had had an 'academic interest' in Lonrho for many years. Now he wanted to become an investor.

This, at any rate, is Mr Bock's version of how the astonishing deal that appears to signal the unexpected retirement of Mr Rowland began.

The City was stunned when Lonrho announced on Wednesday that Mr Rowland was selling his 14.7 per cent stake in the company. Almost to a man, Lonrho watchers had believed that Britain's most buccaneering entrepreneur, who had devoted his life to Lonrho, would leave the company only when he was carried out in a coffin. This was the end of an era.

Or was it? After the shock came the questions and suspicions. Why was Tiny selling out? Why was Mr Bock buying in? Was there more to this than meets the eye? And who is Mr Bock anyway?

Not long ago, Mr Rowland would have unceremoniously kicked the German financier out of the building for suggesting the purchase of what amounts to a controlling interest in Lonrho. However, the response was sympathetic and Mr Bock left his first meeting at Lonrho with the impression Mr Rowland wanted to negotiate. The details were hammered out over the next few weeks during meetings at Mr Rowland's Buckinghamshire mansion.

Mr Bock says he did not know at the beginning that Lonrho had already been in negotiations with Gencor, the South African mining group, and Genting, a Malaysian hotels and casino company. Gencor had apparently offered Mr Rowland up to 130p a share for his Lonrho stake.

At the same time Mr Rowland had been quietly hawking the company around elsewhere. Earlier this year he suggested to his bitter enemies, the Fayed brothers, that they might like to buy Lonrho's Princess Hotel chain. He also offered his own stake to the Barclay brothers at about 120p. The brothers were not interested.

Now, however, he has agreed to accept 115p from Mr Bock for half his stake and an option to buy the other 7 per cent in three years' time. That is a premium of more than 40 per cent above last week's 75p market price of the shares. Mr Bock says Mr Rowland himself offered the shares and named the price on a take-it-or-leave-it basis. Mr Bock took it. He also agreed to underwrite half of a pounds 160m rights issue by Lonrho, and if that did not leave him with enough shares he would be issued with more.

The shares will be sold at 85p each - again a premium to the market price. With his shares from Mr Rowland and the shares he is likely to be left from underwriting the rights issue, Mr Bock will probably end up with about 20 per cent of Lonrho at a total cost of pounds 135m.

But just who Mr Bock is remains something of a mystery to the City and to Lonrho's shareholders. Unlike Mr Rowland, there is nothing flamboyant or charismatic about him. He is a soft-spoken 53-year-old who looks exactly what he was trained to be: a lawyer and tax consultant. The official information is sparse. It says that since the late 1970s Mr Bock has built up a property empire in South Africa and the US.

He is chairman of the supervisory board of Advanta Management, a German commercial property group which owns 50 per cent of the Kempinski luxury hotel chain. He owns 60 per cent of Advanta. He is said to have substantial interests in Eastern Europe.

Although Advanta is known in Germany, hardly anyone in the business community there appears to have met the self- effacing Mr Bock. He is married with two children. He is now evidently worth millions but goes to some lengths to conceal this. Instead of a briefcase, he carries his papers in a plastic bag. According to Dr Dierk Ernst, who is becoming chairman of Advanta, he often goes shopping with a plastic bag, too. 'The Lonrho deal is bigger and more spectacular than anything Bock has done before,' Dr Ernst conceded.

Morgan Grenfell, his merchant bankers, first met him three weeks ago (he went to them because of their connection with Deutsche Bank). They have carried out their standard client clearance procedure on him. They also have pounds 80m of his money in an escrow account to cover his underwriting of the Lonrho shares.

Ever since the deal was announced on Wednesday evening, incredulous voices in the City have asked what this man wants with Lonrho. Mr Bock mildly insists that he is simply an investor. He says he has not even decided if he will become a Lonrho director, although sources close to him suggest that the eventual plan is to make him joint chief executive beside Mr Rowland.

He claims he does not intend to take the company over. This is why Mr Rowland preferred him to the other suitors. If he has plans to break the group up or boost its share price, he is saying nothing about them.

Seasoned Lonrho watchers, however, suspect the mild Mr Bock is being set up to be flayed alive by Tiny. Not that they claim to know what Mr Rowland is up to, but, they believe, nothing is what it seems where he is involved.

How much, for example, does the new investor understand about the company? Only Mr Rowland really knows how it works. Published financial information is scanty, although Mr Bock and the other suitors were shown extra information privately.

There is no doubt that Lonrho desperately needs the rights issue money and the pounds 124m it is getting from selling the VAG car dealership back to Volkswagen. Despite pounds 500m raised over the past few months from selling assets, the companies' debts have risen from pounds 850m to pounds 947m.

Clearly there is a massive cash haemorrhage from somewhere in the group, but from the published information it is impossible to say where. Profits for the year to September are expected to slump from pounds 205m to pounds 79m, while the dividend will be slashed from 13p to 4p.

But even if Mr Bock does understand Lonrho, does he understand Mr Rowland? Tiny is 75. In a letter to shareholders last week, he explained the sale of his shares: 'Believe me, it is only my age that occasions this.' The trouble is, many people are sceptical.

The cynics speculate that he has no intention of stepping down as chief executive this year, in three years or ever; his plan is to manoeuvre Mr Bock into selling back his shares at a lower price. Another theory is that he may step aside and buy out some favoured parts of Lonrho, such as the Observer. He is believed to have offered such a deal to the Barclay brothers last summer.

There are ominous precedents in Mr Rowland's relations with large investors. Alan Bond bought a 15 per cent stake in the late 1980s and for a while looked like Mr Rowland's heir- apparent. Then he made the mistake of suggesting he might bid for Lonrho. Mr Rowland turned on him and helped to put him out of business.

Whatever his motives, Mr Rowland's actions can only cause alarm among Lonrho's army of small shareholders. Their investment is largely a statement of faith in Tiny himself. Mr Rowland, however, has negotiated himself an exit at a price far higher than they can hope to get for their own shares. This is legal, but hardly tactful. And in the meantime, Mr Bock is refusing to talk to the shareholders until after the rights issue. Not for the first time, long-suffering Lonrho investors are demanding to know what the hell is going on.

(Photograph omitted)