At a fairly select dinner party last week, a senior French banker pronounced: “Privatization is like castration, it works better on dogs.” You could have heard a pin drop. A delightful Austrian lady asked me whether the Frenchie didn’t like animals. I quickly explained that in this instance “dogs” probably referred to state assets which no sensible person would want to touch unless wearing surgical gloves.
Of course the Komarovskys, like other once proud families, have been experts on privatizations since the beginning of 1944, except that our experience was in reverse privatizations – the invading Russians taking all the family assets into their private possession in exchange for one bottle of vodka and a zero-coupon perpetual rouble IOU. “Now is your chance to take back great chunks of Mother Russia for Black Knight Bank and yourself,” says the Austrian lady’s husband. I tell him that if he is gung-ho on the Russians he should speak to Hans-Jörg Rudloff at MC Securities or Ian Molson at CS First Boston who desperately need someone to share their increasingly isolated confidence.
As the ladies retire I congratulate the French banker on his “dogs” philosophy. To be honest, the French state has very little to sell which isn’t a waterlogged hound so it is difficult for them to be selective. Of course the British set the real privatization ball rolling with the all-conquering Margaret Thatcher playing striker, sweeper, full-back and referee. With her “get filthy rich as quickly as you can” message, the early UK privatizations were nearly a licence to steal. Who can remember Kleinwort Benson’s triumphant offering in November 1984 of 50.2% of British Telecom? At the time it was the largest issue of shares the world had ever seen, raising just under £4 billion. There was that unforgettable photograph of Sir George Jefferson (then BT’s chairman), David Clementi, Sir Martin Jacomb and Milord Johnny Rockley trying to look composed in a gale-force wind and the three Kleinworters privately saying to each other: “I wish I had used some of George’s hair gel”. Poor Kleinwort. The first BT issue was the bank’s crowning glory for many years. After that the only talk of Kleinwort on the cocktail party circuit was of video-taped canoodling on the trading-room floor and Charlie Hue-Williams’ momentary lapse of concentration when he bought a monster block of Premier shares thinking he had sold them. Little Kleinwort became a party wallflower. Nice fat-cat clients like BT did a runner. Only some magic and much determination from Simon Robertson and friends saved Kleinwort’s face and allowed KB shareholders to divvy up £1 billion of Dresdner Bank’s money between them.
“Why has privatization recently gone sourer than the demeanour of a Goldman Sachs partner who has just seen a juicy mandate fly out of the window?” asks an Italian banker. These pasta-munchers are so smooth. “Your lot haven’t helped,” comments the Englishman. I make an effort to defuse a possible confrontation. “Enel and Stet are surely crown jewels in their own right which couldn’t be swapped for even the best bolito misto in Rome,” I say.
“Up your Omsk,” cries our token Russian, Sergei Molotov, one of the dinner guests whose grandpappy was either politically related or who invented the famous cocktail. But perhaps the fiery Sergei has a point. The financially potless Russkies were recently trying to complete one of their own privatizations and unload a whole cluster of dodgy telephone companies onto the charming Italians at Stet who had either been out in the sun too long or had enjoyed a lunch fortified by buckets of grappa. With Stet itself about to be privatized wasn’t this just the perfect time for the Russkies to dump 25% of the otherwise nearly unsaleable Svyazinvest quietly on Stet’s gullible prospective international investors where BZW had been suckered into leading the books? Somewhere down the line the Italians saw the light and abandoned ship by suggesting that Stet place most of the purchase price in a separate escrow account until Svyazinvest proved it owned at least one telephone line.
“Seems fair to me,” I said but Sergei Molotov cried: “Off with their one-piece blinis and a curse on all Imperialists.” The crazed fellow then started to throw fine Stewart crystal into the fireplace sobbing: “But we needed Stet to sign off on the deal by December 23 in order that all of the Svyazinvest senior executives could receive a new BMW 850 each and to bank their cash cut in the usual customer-friendly Grand Cayman account.”
The other guests and myself raise our glasses in sympathy to substantial lost fees for NM Rothschild and others who represented the irksome Russkies. I think of proposing that we send each Svyazinvest senior official a nice new Lada but common sense prevails.
Why has privatization suddenly become so less glamorous as well as less profitable? A kilted guest, Torquil McScone of the Edinburgh Garden Hedge Fund, attempts to explain: “It was fine while governments selected their own best lead-manager. But as soon as the Yanks came in and started telling the former laundry-wallahs and rickshaw drivers who had later become finance ministers that one rupee or one ringgit could actually be a dollar and fifty cents, the shoot began to hit the fan.” Everyone around the table applauds McScone and agrees that the US investment banks are pushy, greedy and almost invariably uncouth but wouldn’t we all love their bonuses? For some reason the laundry-wallahs who became finance ministers are impressed with the Yanks’ “roll you right over on your back” approach in beauty parades. Just look at Sing Tel, PT Tel and Deutsche Tel to name but a few. When the Greek OTE shows its face on the road again you can bet your sweet bippy that one of the bulge-bracket Americans will have persuaded the ouzo-quaffers that the deal won’t fly unless it’s sold into retail in Spokane, Syracuse and South Bend. Also, as the Americans are inveterate liars and have such improbable family backgrounds they will also claim to have descendants in Piraeus and to have hobnobbed with Ari and Jackie aboard the Christina in days gone by.
I ask McScone whether the main fund managers are changing their attitude towards privatization issues. “Let me tell you laddie,” he begins, “that where we once bought every share in sight, we now short them until we can hear the pips squeak.” The English banker suggests that the main problem with the privatization programmes of the next two years is the huge overweighting in the telecoms and electricity sectors. “You’ve got it in one, laddie,” cries McScone. “Very soon one of the big banana republic state telephone companies will contact Rothschilds or Morgan Stanley to say that they have the deal of the century to propose. However, the response from Rothschild and Stanley will be: “Don’t call us, we’ll call you.”
