by Alan Bristow
Prime Minister Margaret Thatcher had invited me to Downing Street and asked me to take a financial interest in Westland. I was a staunch supporter of her government and had contributed heavily to Conservative Party funds. During the 1979 election campaign I donated £50,000, as well as making helicopters available for Mrs Thatcher to travel around the country. I sent the bills to Conservative Central Office never expecting them to be paid, and my expectations were fully borne out. After the election I made known to government my long-held opinion that Westland should be part of a European helicopter manufacturing group, operating with a common policy and under a common management – something I maintain to this day. In Europe, each individual helicopter manufacturer had to bid against American companies who nearly always had US government support, direct or indirect. Because the European industry was fragmented, companies could be picked off in competition one at a time. They were also building helicopters that were so similar to each other that there was a great deal of duplication. A large European company, funded by the existing helicopter manufacturers in France, Germany, Italy and the UK, would be more cost effective, more competitive and better able to hold its own against American products.
I was asked to brief the Prime Minister in Downing Street early one evening in 1984, and was shown into her big private sitting room upstairs. I was ushered to a low armchair while the Prime Minister sat slightly higher on an upright seat. The Treasury minister Ian Gow flitted in and out fetching drinks – he was murdered by the IRA a few years later. I accepted a whisky, feeling somewhat restricted in my comfortable chair.
We had met several times previously but had never discussed the oil industry or the helicopter business. Mrs Thatcher started by asking me how Bristow Helicopters was doing, and I was able to tell her we’d never been busier or more profitable.
‘For how much longer will the North Sea be productive, Mr Bristow?’ she asked.
‘It won’t be less than fifty years, ma’am, although it will become more difficult to maintain the extraction rates they’re getting at the present time. They haven’t even moved into the deep areas west of Scotland, but they’re working to overcome the technical difficulties of drilling at great depth. Much depends on how their drilling platforms can be moored to remain stable in deep water.’
The Prime Minister was clearly aware that all was not well at Westland, where labour strife was a regular feature, productivity was low and profits never matched the optimistic forecasts of the Board. My opinions on the need for co-operation with other European helicopter companies had been widely circulated.
‘Why do you think the helicopter companies need to get together?’ she asked.
‘Individually, European manufacturers don’t have the resources to take on the Americans and win,’ I said. ‘If we’re not careful the Americans will end up with a monopoly. Instead of competing against each other, they must work together.’
‘Which companies would be part of this group?’
‘Westland of course,’ I said. ‘Bölkow is a serious German contender, Aerospatiale in France, Agusta in Italy, and there are smaller companies in Spain and Holland who either have helicopter designs or are producing components for the main players.’
‘You buy Westland helicopters, don’t you?’
‘I do when I can, ma’am. But often we are forced into buying American equipment because it is more readily available, at short lead times, with competitive prices and usually quite adequate performance.’
‘And Westland can’t match them?’
‘I’m afraid not, ma’am.’
‘Why not?’
Westland’s shortcomings would fill a book. ‘Basically they’re living on Ministry of Defence contracts to the exclusion of almost everything else,’ I said. ‘They don’t go out and sell in the civilian market, and even if they did, they don’t have the right products for that market. They’ve got three men doing one man’s job, and the management hasn’t a clue how to put things right.’
‘Do you have shares in Westland?’
The question surprised me. ‘No, I don’t.’
‘You ought to take an interest, don’t you think?’ she said. ‘Perhaps you could shake them up a bit.’
‘I’ll give it some thought, ma’am,’ I said. ‘It could be something of a distraction.’
‘Well, you must do what you think is right.’
I struggled up out of my armchair and walked out of a back door to meet my driver. I didn’t regard it as a constructive meeting; I had simply reiterated my position, and the Prime Minister had listened non-committally. Her suggestion came back to me as I watched Westland’s share price continue to sag, but Bristow Helicopters was expanding at breakneck speed and there was little time to devote to anything but the business in hand. Nonetheless I bought the odd parcel of shares and kept an eye on the company news; and when Lord Cayzer and I differed so radically about the future direction of Bristow Helicopters, I decided not just to take an interest in Westland, but to take it over.
My motives were many and various. It was a challenge. I had time on my hands and access to cash. The share price didn’t reflect the asset value or the potential of Westland. It was a company that was being badly run, in a trade I knew something about. I knew what the customer wanted because I had been their biggest civil customer. And they were the people who’d fired me! I began to run the rule over Westland during the period when I was handing over the chairmanship of Bristows to effect a smooth transaction to one of my protégés, Bryan Collins. Before I launched a bid, I wanted to be sure Margaret Thatcher had meant what she said and that the government would back me. Through Cranley Onslow MP, who was the company’s retained lobbyist, I arranged a private meeting with a Trade and Industry minister, Geoffrey Pattie MP. Would the government put obstacles in my way?
‘On the contrary,’ said Pattie, ‘You’d be a fairy godmother.’
I sent a copy of Westland balance sheet to Sir Philip Shelbourne, who by then was chairman of Britoil, and asked him to look it over. He and I had become fast friends after the problem with my tax exile had been smoothed over; when I had approached him for advice in the early 1960s he said I had a damned cheek after the way I’d treated him. But business is business.
He called me a couple of days later. ‘You’re absolutely right, Alan,’ he said. ‘It’s ripe for take-over.’
With Sir Philip’s support I had no difficulty raising backing for a bid. I formed a company, Bristow Rotorcraft Ltd, whose Board included Philip Shelbourne, Sir Donald Gosling of National Car Parks, Lord Rockley of Kleinwort Benson, Richard Westmacott of Hoare Govett, and my dearest friend and colleague, George Fry. I did the City rounds with Kleinworts and Hoare Govett, explaining to the institutions what I intended to do, and it really started to gallop. A number of institutions invested, including the Post Office Pension Fund. Using a company of mine called Baynards Holdings AG, I began buying Westland shares in February 1985 at between 103p and 115p. At a meeting with Kleinworts I presented a nineteen-point questionnaire requesting more financial information from Westland. As I was to discover, their disclosures were neither full nor honest. Kleinworts were also having great difficulty getting answers from Schroeder Wagg, who were Westland’s bankers.
Throughout the process I kept government departments informed of what I was doing. I had private meetings with Defence Secretary Michael Heseltine, with Trade Secretary Norman Tebbit, with Geoffrey Pattie, and with a number of senior civil servants. At the end of April 1985 Bristow Rotorcraft Ltd offered 150p a share, valuing Westland at £89 million. I knew there was a need for another £60 million to stabilise the company, and not only did I have this money in hand but I had access to further substantial cash reserves. My plans for Westland had been meticulously researched. I had evaluated and discarded the idea of manufacturing the Sikorsky Black Hawk helicopter under licence. All three armed services were adamant that they had no use for it; the Navy said it was too small for anti-submarine work, the RAF was
oriented towards the Boeing Chinook, and the Army wanted the McDonnell Douglas Apache. Westland had a talented helicopter designer called John Speechley, who had designed the Lynx, and they were working on one project that could save the company. This was the EH101, conceived as a military helicopter – in fact, the anti-submarine helicopter for which the Royal Navy were holding out – but with clear civil applications if the right derivatives were put in train. In particular, it had a composite rotor head that was light years ahead of anything the Americans were producing, something that could give the UK a world-beating advantage if Westland were to operate in concert with other European helicopter manufacturers to make the technology widely available. From my contacts at Sikorsky, of whom I was also a major customer, I knew they coveted the EH101 rotor head, which would take them years of testing and many millions of dollars to replicate. My intention was to go all-out on the EH101, eliminating the desperately bureaucratic Westland procedures that were eventually to add fifteen years to its development schedule.
Basil Blackwell, who had by then taken over from Lord Aldington as chairman of Westland, was aghast when I publicly unveiled the bid. He should have welcomed it with open arms because Westland was in trouble. Instead, Blackwell rejected it and began to cast around for a white knight to bail him out. Westland was already in partnership with Agusta of Italy on the EH101 and Basil tried to talk them into taking a major equity stake, but Agusta was in worse shape than Westland and was being propped up by the Italian government; it had no cash to spare. Admiral Sir Raymond Lygo at BAe and Lord Weinstock at GEC told me Basil had been round to them offering the company, but they knew Westland owed almost £50 million to the banks and at the time they weren’t interested. Eventually Basil accepted the inevitable and recommended acceptance of the Bristow Rotorcraft Ltd offer to Westland shareholders.
While he was trying to unearth a white knight, I was talking to a lot of people in industry, the government and the City about Westland. I discussed the company with Harry Gray and Bill Paul of Sikorsky at the Paris Air Show in June 1985 and they offered to take my Westland shares off my hands for a good price. I was buying, not selling, and I told them I couldn’t give them an answer at that stage. I also tackled Ralph Robins, managing director of Rolls-Royce, about it. ‘You’re a big contractor to Westland,’ I said. ‘What do you think of their financial position?’
‘Alan, they owe me for ten Gnome engines that have been sitting in their factory for over a year and they keep crying poor boy,’ he said. ‘What’s more, I believe you’ll find they owe the government £41 million in launch aid for the WG30.’
I knew about the engines, but not about the government debt. ‘That’s not on the balance sheet,’ I said.
‘I’m not surprised,’ said Ralph. ‘If it was, they’d be insolvent.’
The WG30 was Westland’s attempt to make a civilian helicopter, but it was an utter disaster. It showed how far removed Westland was from the realities of the civil market. I was widely quoted at the time as saying that it was ‘the wrong helicopter, for the wrong market, at the wrong time,’ and that pretty much summed it up. The WG30 was noisy, heavy, complicated and expensive. I had told Basil Blackwell it was a non-starter. The payload was limited, the speed was inferior to the competition, and in hot conditions it could hardly get off the ground. The engines were too maintenance-intensive for a civilian machine, and they could never deliver on time and on price. In 1983 Westland had backed an American company called Airspur to put four WG30s into service, and were rewarded with a lawsuit from injured passengers when a tail rotor failed and one of them crashed in Los Angeles. The FAA grounded the WG30 and Westland lost more than £5 million on the Airspur operation. They managed to persuade British Airways to put two of them on the Scilly Isles run for a while, but it was never a feasible civilian proposition. The government had offered India £65 million in aid on condition the money was used to buy twenty-five WG30s, but the Indians didn’t seem to want them, even for nothing. Indian Prime Minister Indira Gandhi had signed up for them but after she’d been assassinated her son Rajiv took over, and he was a pilot who was better able to assess their value. He wanted nothing to do with them.
Westland had twenty-one WG30s in production and components for another twenty lying around the factory in Yeovil, but no buyers. My first act had I taken over Westland would have been to kill the WG30, probably by the usual expedient of sending it to the RAF at Boscombe Down and having them test it and turn it down. But unknown to anyone outside Westland and the Department of Trade and Industry, Westland had gone to the government in February 1983 seeking a bailout of £41 million. This was described as ‘launch aid’, which would enable them to improve the WG30 to the point where it could find a market. Somehow they persuaded then the Industry Secretary Patrick Jenkin to lend them the money. The contract, as scanty as the thinking behind it, stipulated that the loan could be called in at any time. I had a friend on the Westland Board in the person of Admiral Sir John Treacher, who was head of marketing. Sir John was a naval aviator who left the Royal Navy when many people thought he was in line to become First Sea Lord because he wanted to make his fortune in business. He certainly wanted to play a greater role at Westland, and I’m sure he saw me as a way of fulfilling that ambition. He was a very able operator. I asked him why the £41 million wasn’t in the figures.
‘It’s only a debt if the government calls it in,’ he said.
Sir John Cuckney, who was later parachuted in as chairman to save the company, made no bones about Westland’s reasons for leaving it off the balance sheet and failing to disclose it to Kleinworts during due diligence. ‘The problem was we would never have got our accounts signed off by the auditors, nor embarked on a reconstruction, nor got it underwritten, if we had to disclose in our accounts that the DTI had the right of instant recall on that sum of money,’ he said.
But the history of such government loans suggested there was a good chance it need never be repaid. Did the government intend to call in the loan, or write it off? I went to see Michael Heseltine. He and I had first had dealings when he put a helicopter maintenance contract previously enjoyed by Westland out to competitive tender, and Bristow Helicopters had won it. We held similar views on the need for a rationalisation of helicopter companies in Europe in order to compete with the Americans.
Heseltine knew of the loan but was unaware that it had not been declared by Westland. ‘I don’t know if this has to be repaid or not,’ he said. ‘You’d better check with Norman Tebbit.’
Tebbit, my old adversary from the pilots’ union during my time as chief executive of British United Airways, had taken over from Patrick Jenkin at the Department of Trade and Industry. Tebbit remembered me, but he was perfectly civil and didn’t hold a grudge. It was quite a leap, ideologically and otherwise, from being a union official to being a minister in a reforming Tory government, and he looked more comfortable in the latter role than in the former. Tebbit confirmed Westland’s commitment to repay £41 million but he didn’t think it was his side of the ship – he washed his hands of it, saying he thought it would have to be decided by Aviation Supply, part of the Defence Ministry.
The situation was serious. Bristow Rotorcraft Ltd now owned or controlled sixty-nine per cent of Westland Helicopters and we were fast reaching the point where according to the laws of the Stock Exchange BRL would have to buy the company outright. My personal exposure was £17.5 million. A Board meeting had been scheduled at Kleinworts for the following day to decide how to proceed. The day after that, BRL would have to commit to buy. By this time, Westland’s brokers had given Kleinworts and Hoare Govett details of all the substantial liabilities, which confirmed a £41 million arrangement with the Ministry of Supply. The money could be repayable at the whim of politicians who didn’t even know who was responsible for it, much less feel able to make a decision on whether it was to be written off or not. I was appalled that Westland’s directors had chosen to remain silent about it; later, trying to explain
the situation away, Geoffrey Pattie was to claim that the takeover bid was a matter between two private companies, and nothing to do with the government!
Next day’s Board meeting was fractious. BRL held acceptances from some sixty-nine per cent of Westland shareholders, and if they continued at the rate at which they were coming in, the bid would soon go unconditional. It was a frightening position to be in. I’d been buying shares at up to 127p, a sure over-valuation if Westland was liable for this hidden debt. I thought it would be better to postpone the offer. The institutions thought we should proceed. It was decided to continue, but at seven o’ clock in the evening I had a call from Christopher Eugster at Kleinworts – who, I was surprised to discover, had been buying Westland shares on their own account, as had my brokers, Hoare Govett.
‘For god’s sake, stop the show,’ Eugster said.
‘It’s a bit late to say that now,’ I said. ‘Your chairman Lord Rockley was at the Board meeting today and he acceded to the recommendation of the other investors to continue.’
‘You’ll have to have another Board meeting to overturn the decision.’
‘I’m not sure we can ... Sir Philip Shelbourne has gone home. I don’t think I can get hold of Sir Donald Gosling, I might be able to reach George Fry . . .’
‘This has to be done before tomorrow morning,’ he said. ‘We’ll set up a patch call.’
I’d never heard of such a thing, but soon afterwards we were all linked through Kleinworts by telephone.
Christopher Eugster was unequivocal. ‘Kleinworts strongly recommend that you do not extend your offer in the absence of a categorical assurance that this £41 million is not repayable,’ he said. ‘If it becomes unconditional tomorrow, you’re stuck with it – if you get ninety per cent of the shares, BRL will be obliged to complete.’