by John Preston
Four hours after he’d first heard the news, Murdoch ran across the tarmac at Sydney airport clutching an overnight bag. Just like Maxwell, this was the moment he had been waiting for. Murdoch’s father, Sir Keith, had been the most successful newspaper executive in Australia. But when he died in 1952 most of his assets disappeared in death duties. All that was left was a small afternoon tabloid in Adelaide – the News.
Rupert Murdoch turned the News into a huge success and used it as the cornerstone of what soon became a sizeable newspaper empire. But he was still virtually unknown outside Australia. Now aged thirty-seven, Murdoch too dreamed of owning a British paper, of setting up base camp in Fleet Street. The problem was that Maxwell’s offer of £34,000,000 was way out of his league.
Despite this, Clive Carr – Sir William’s nephew – thought Murdoch should meet his uncle as soon as possible. A meeting was arranged for the following morning. Having heard about Sir William’s habits – ‘I knew he was a big drinker and a big gambler’ – Murdoch realized he needed to act before the Stock Exchange opened at ten. He suggested breakfast at eight. Reluctantly, Sir William agreed to eight-thirty.
When Murdoch arrived at Carr’s flat in Belgravia, he found a large reception committee ready to greet him, including representatives from Carr’s bank, Hambros – Maxwell’s champion, Sir Charles Hambro, had died five years earlier. Unused to getting up so early, Sir William’s mood was not improved by the scrambled eggs his housekeeper had served him for breakfast. ‘She must have put milk in them,’ he told Stafford Somerfield, ‘They were awful.’
‘Old man Carr was very patronizing,’ Murdoch recalls. ‘There was a lot of “I love Australians”, and all the rest of it. He told me that Maxwell had put in an offer of fifty shillings a share and asked what I was going to do about it.
‘I said, “Well, I’m prepared to put in some assets and buy some shares, and in return I’ll get thirty per cent of the company.”’
Ripples of disbelief ran round the table. But that wasn’t all: Murdoch had one more condition. ‘I told them, “I’ve got to be Chief Executive.”’
Carr was flabbergasted. ‘Immediately he said, “Oh, that’s not possible.” Then he gave me some more patronizing stuff about if you come here, I can see you’ll do very well, young man. I’ve known so many nice Australians . . .’” Deciding that he’d heard enough, Murdoch thanked Carr for breakfast and said he was heading straight back to Australia with no hard feelings.
‘Maxwell’s an evil man, you know,’ Carr told him.
‘Well, I’m not an evil man,’ Murdoch said. ‘I’m here to help you if you want, but I don’t like to waste your time on dither.’
Standing up, he headed for the door.
‘I was about to go when this senior guy from Hambros Bank said, “No, no, Rupert. Could you just go into this room for a moment?”’
Murdoch sat and waited. By the time he was asked to come back, Carr had caved in and agreed to almost all of his demands. Three days later, Murdoch quietly bought up 3.5 per cent of the News of the World shares. Maxwell had been openly scornful when he heard that Murdoch was interested in the News of the World; if this was his only rival, plainly he had nothing to be worried about. At this stage the Carr family had 25 per cent of the shares, Maxwell 25 per cent and Murdoch a mere 3.5 per cent.
But on 24 October 1968, Maxwell had a rude shock. Murdoch called a press conference, where he announced that he planned to increase his own stock holding to 9 per cent and secure another 30 per cent of News of the World shares in return for a diverse array of his Australian titles.
Battle had been joined. For once in his life, Maxwell was lost for words. It seemed that the Carrs were so desperate to stop him that they were prepared to sell to someone who currently owned just 3.5 per cent of their shares. To make matters even worse, Murdoch was also a foreigner, an outsider. But Murdoch had already realized something that was only just starting to dawn on his rival. However suspicious the City of London were of him, this was nothing compared to their attitude to Maxwell:
‘I could smell that the Establishment would not let him in.’
And while Murdoch may have been Australian, he was at least ‘a quiet Australian’, as the Times noted approvingly. Over the next few weeks Maxwell did everything he could think of to discredit Murdoch, paying people in Australia to dig up any dirt they could find. He even tried – unsuccessfully – to buy the Adelaide News.
For his part, Murdoch retaliated by recalling how Maxwell had tried to rip him off over the encyclopedias deal. Maxwell promptly sued for libel. And so it went on. Amid what was now open warfare, the Carrs began to wobble. Like them, Stafford Somerfield was equally unimpressed by Murdoch’s raw colonial ways, writing in his diary, ‘His Australian accent was ghastly.’
Fortunes swung one way, then the other. An Extraordinary General Meeting was arranged for 2 January 1969 at which shareholders would decide which of the two offers to accept. By now the Carrs and Murdoch together had 40 per cent of the shares, Maxwell had 25 per cent, while around 30 per cent of the shareholders had yet to make up their minds which way to go.
At this point, Maxwell scored a significant victory: he demanded that any shares acquired since the takeover battle began should be excluded from voting. To Murdoch’s fury, the Takeover Panel, which oversaw important takeovers and mergers, agreed with him. What had started to look like a foregone conclusion had now become too tight to call.
In the meantime, Murdoch had gone back to Australia to be with his wife, Anna, and their baby daughter, Elisabeth. In December, the Murdochs returned and were photographed arriving at Heathrow with Elisabeth in a basket. Despite himself, Stafford Somerfield was impressed: ‘Here comes Murdoch, back from Australia, smiling and fatter; beautiful blond wife on one arm and baby on the other. The boy doesn’t miss a trick. Everyone will fall for the baby.’
Even so, Murdoch was not feeling optimistic: ‘The financial press had come out 100 per cent for Maxwell – including friends of mine from college who were now working as financial journalists.’
At 10.30 on the morning of 2 January 1969, Maxwell’s Rolls-Royce pulled up outside the Connaught Rooms in Covent Garden. He was dressed in an electric-blue suit and an astrakhan hat, and reported to be looking ‘swarthy and grim’. Shortly before, the Carrs had arrived in their Rolls Royce, accompanied by a fleet of cars containing ‘a large number of women in fur coats’.
By the time Maxwell made his entrance, the hall was already packed with more than 500 people. As well as the women in fur coats, there was a sizeable contingent of what were described as ‘small men in mackintoshes’ – traditional News of the World readers who had come to show their support for Carr. Later it would emerge that many of these men in mackintoshes were in fact News of the World employees who had been lent single shares for the day so they could vote for him. All of them had had to sign contracts promising to return their share certificates as soon as the vote was over.
This was Anna Murdoch’s first sight of Maxwell. Twenty years later she wrote a novel, Family Business, which included a lightly fictionalized version of the News of the World takeover battle. Maxwell appeared as ‘Socialist millionaire Piers Molinski’, and was referred to simply as a ‘dreadful man’.
Looking thinner and more sickly than ever, Sir William Carr spoke first. He was greeted with a lengthy burst of applause – timed by Stafford Somerfield at forty-eight seconds: ‘Hundreds of pink, upturned faces gazed at him through the haze of tobacco smoke.’
His voice seldom rising above a whisper, Carr began by striking an unexpectedly philosophical note for a shareholders’ meeting: ‘What is money when you can get so much more out of life?’ he wondered. Taking frequent sips of water and peering at prompt cards that were held up to jog his memory, he went on to say that ‘Mr Murdoch has enjoyed great success in Australia and he will bring new blood and energy to our organizations.’
Murdoch spoke next. As he watched, Stafford Somerfield found that
his feelings were even more mixed than before: ‘He rises from the centre of the hall in the front row. His dark clothes, tie and white shirt are discreet. He has an engaging smile. He looks fresh – boyish almost.’ But not everything had changed: ‘Once again I think how excruciating his Australian accent is.’
Then it was Maxwell’s turn. Before he could begin, a member of the audience shouted out, ‘What is your name and what are your qualifications to speak?’
Maxwell rode this easily enough. ‘My name is Robert Maxwell and I represent twenty-five per cent of the shares,’ he said.
But he’d hardly finished speaking when boos started to ring out – boos that appeared to come both from the women in fur coats and the men in mackintoshes. Maxwell ignored them. He tried to carry on, but still the boos rang out. Even Murdoch was surprised. ‘Every time Maxwell tried to say anything everyone started booing; it was a pantomime.’
‘May I make a statement in reply to your opening remarks?’ Maxwell asked Sir William in a brief lull between boos.
‘Yes,’ Carr told him, ‘but you must not speak for longer than Mr Murdoch. That was three minutes and ten seconds.’ The boos turned to laughter. Standing on the dais in his electric-blue suit, Maxwell appeared stunned. Whatever he had been expecting, it was not this.
Pointing a finger at Carr, he said, ‘Are you going to give me a fair hearing, or not?’
‘Just get on with it,’ Sir William told him in a much firmer voice than before.
What nobody there knew was that two weeks earlier Maxwell and Carr had had a secret meeting to try to find some common ground. This too had not gone well. At the meeting Carr had asked Maxwell if he would be able to stay on at the News of the World – as Chairman – if his bid was successful.
No, said Maxwell.
Why not, Carr wanted to know.
It was often said of Maxwell that whenever he saw a belt, he could not resist hitting below it. On this occasion, he had swung especially hard. ‘Because every time I have a haircut in the Savoy at four o’clock in the afternoon, I see you and your cronies still drinking Martinis,’ he told Sir William, ‘and I don’t think that is suitable training for any Chairman of mine.’
Now as Maxwell struggled to make himself heard above the boos and catcalls, a thin smile could be seen flickering across Carr’s haggard features.
‘Go home!’ someone cried.
‘Get back to the Old Vic!’
‘Get lost!’
‘What about the pensioners?’ one man wanted to know.
Again Maxwell took no notice. When he launched into a lengthy denouncement of the News of the World’s board, the smile disappeared from Carr’s face. Standing up with some difficulty, he said, ‘I don’t think the shareholders care a twopenny-cuss what you think about their board. Does the meeting wish to hear any more from Mr Maxwell?’
Impassioned cries of ‘No! No! No!’
‘In which case I will now put the resolution to the meeting,’ Carr went on. ‘Do the shareholders approve of the link-up between the News of the World Organisation and News Ltd of Australia which increases the company’s capital to £6,573,000 by making a further 5,100,000 ordinary shares of five shillings each to be allotted as fully paid to News Ltd?’
So many hands went up that it took several minutes to count them. The final result was 299 in favour and only 20 against. To widespread astonishment, Rupert Murdoch had become the new owner of the News of the World.
Outside, Maxwell gave a terse statement: ‘The law of the jungle has prevailed.’ A few days later, Murdoch was asked what he thought of Maxwell. ‘He called me a moth-eaten kangaroo,’ he said in an affronted voice. By then Derek Jackson had been told what had happened. He’d gone riding in the Swiss Alps accompanied by his latest fiancée and it took a while to track them down. ‘I am the most disappointed man in the whole world,’ Jackson declared. ‘I regard the News of the World board as raving mad.’
For Maxwell, the whole episode left him badly bruised. Far worse than the financial cost – around £200,000 – was the humiliation, the way he’d been jeered at, condescended to and cold-shouldered. But what hurt most of all was how he had been out-foxed by someone he hadn’t taken seriously until it was too late. As baffled as he was angry, Maxwell retreated to Headington Hill Hall. ‘He came limping home and I put him to bed,’ Betty recalled. ‘He was terribly disappointed, but the next day he decided to shrug the whole thing off . . . Nothing gets him down for long.’
The truth of this was about to be put to the test in ways that neither of them could have imagined.
9.
Robert Maxwell’s Code of Conduct
Once again, encyclopaedias would prove to be Maxwell’s downfall – the same encyclopaedias he had tried to sell Rupert Murdoch in 1965. The next year Maxwell paid £1,000,000 for the company that published Chambers Encyclopædia. Later that year he brought out a new fifteen-volume edition of the Encyclopædia. To publicize his new project, Maxwell took out newspaper advertisements which brimmed with missionary zeal: ‘I’d like to give every child in this country the freedom to learn from the world’s greatest storehouse of knowledge.’ Hoping to convince people that the venture had the royal seal of approval, he also put a prominent dedication to the Queen on the front page of each volume.
On 22 February 1967 Maxwell called a press conference at the Dorchester Hotel in London. There, to general amazement, he announced that in the last year he had personally sold 7000 sets of Chambers Encyclopædia worth £1,000,000. What’s more, he claimed to have orders for another £1,500,000. As a feat of salesmanship, this was unprecedented. Lists were handed out to the journalists at the press conference giving details of how many sets of encyclopedias he had sold and where: 1500 sets in America, another 1500 in Japan, 500 in India and so on.
By now Maxwell was so taken with encyclopedias that he added the eighteen-volume New Caxton Encyclopedia to his collection, and set up a new company, the International Learning Systems Corporation – ILSC – to run them all. He even published Robert Maxwell’s Code of Conduct for Direct Sellers, a kind of etiquette handbook for door-to-door encyclopedia salesmen.
What lay behind Maxwell’s obsession? As a keen autodidact, the idea of a storehouse of knowledge that anyone could dip into at will had an obvious appeal. But naturally there were commercial motives too. The beauty of encyclopedias was that anyone who bought a subscription was effectively locked into a contract for as long as it took to publish the entire edition. Usually this took several years, but in some cases it could go on for decades. Not everyone, though, was convinced by Maxwell’s success story. When the Standard Literature Company of Calcutta was asked to confirm that they had bought 500 sets of Chambers Encyclopædia, the company replied the real figure was considerably less.
It was in fact zero.
Nor were these the only figures that had been heavily massaged. Far from selling 7000 sets of Chambers Encyclopædia, Maxwell appeared to have sold around 700. Undeterred, he kept on repeating his claims that he was the most successful encyclopedia salesman the world had ever known. While some may have had their doubts, others were only too happy to cling to his coat-tails hoping to share in the spoils.
Saul Steinberg was an American businessman who had made a fortune out of leasing IBM computers. Aged twenty-nine, he owned a twenty-nine-room house on Long Island and was reputed to have made more money more quickly than anyone else in America. Steinberg had heard a lot about Maxwell, and liked the sound of him. He may have been a brute, but he appeared to be a very successful brute.
In the spring of 1969, Steinberg approached Maxwell with an offer. His company, Leasco, would buy Pergamon Press and all its subsidiaries, including ILSC, for £25,000,000, of which Maxwell would get £8.500,000 – £135,000,000 today. While Steinberg would remain Chairman of Leasco, Maxwell would become Deputy Chairman, with 2.5 per cent of the shares.
Maxwell also liked the sound of Steinberg. Not only would he gain a huge amount of money from the sale;
he would also have access to Steinberg’s American markets. But before buying Pergamon, Steinberg’s accountants naturally wanted to go through the books. While the rest of Maxwell’s empire appeared to be in good shape, ILSC was a shambles – mainly because no one could work out how many sets of encyclopedias Maxwell had really sold.
Maxwell always liked to claim that accountancy was not a science but an art, and now he came up with a suitably creative solution. He told Steinberg that, much to his regret, the Pergamon accounts had been unavoidably delayed. Apparently, he was doing business in so many countries – more than forty in all – that it would take longer than usual to put the figures together. As a result, the final version wouldn’t be ready until September.
Just in case Steinberg became suspicious, Maxwell produced a glossy annual report claiming that ILSC had made sales worth £7,500,000 in its first eighteen months of business and was looking forward to a ‘bright and profitable future’. For good measure, he asked his solicitor to give an ‘unprejudiced’ view of the company. Unswayed by the fact that Maxwell was paying him to give his opinion, the solicitor wrote that ‘Mr Maxwell is a man of undoubted integrity.’
Everything seemed back on track – but not for long. In Maxwell’s 1967 annual report, he had confidently predicted that Pergamon would make around £2,000,000 profit in 1968. Now, with the sale to Leasco in the offing, he did everything he could to maximize the company’s profits so they hit his £2,000,000 forecast.
In order to do this, Maxwell gave full rein to his artistic leanings. Pergamon’s warehouse at Olney in Buckinghamshire was full of unsold back issues of their journals. Previously, these back issues had been declared worthless. But now, it seemed, two buyers had emerged who were prepared to pay a total of £974,000 for them. And who might these buyers be? By a remarkable coincidence, they turned out to be Maxwell’s own subsidiaries. Once again, he was using one part of his empire to prop up another.