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Any other business

Any other business

Tony Hayward’s making the headlines, but Rothschild’s the one they’re betting on

25 June 2011

12:00 AM

25 June 2011

12:00 AM

Tony Hayward’s making the headlines, but Rothschild’s the one they’re betting on

Remember Lasse Viren, the Finnish policeman who fell over halfway through the 1972 Olympic 10,000 metres final in Munich only to rise again, sprint past the leaders, and win gold in world record
time? Well, he’s got nothing on Tony Hayward, the former chief executive of BP who stumbled so woefully in his handling of last year’s Gulf of Mexico oil-spill disaster that he seemed
to have been howled right out of the stadium of big-corporate life.

Less than a year after that global public humiliation, Hayward is back on his feet and fronting a new venture called Vallares which has just raised £1.35 billion from investors — half
of them American — to acquire as-yet-unidentified oil and gas assets in emerging markets. The capital-raising comfortably exceeded its £1 billion target, and as soon as Vallares
actually finds a business to buy, the £20 million worth of ‘founders’ securities’ for which Hayward and three partners — Nat Rothschild, his associate Tom Daniel and
ex-Goldman Sachs banker Julian Metherell — have ante’d up will convert into 7 per cent of the whole company, bringing them a windfall worth many times their stake money. So Hayward,
Daniel and Metherell are heading for the Rich List, where Nat Rothschild already resides.

Can all this really be based on a market reassessment of Tony Hayward? Do the world’s most sophisticated investors now agree with Rothschild that ‘on both sides of the Atlantic, Tony
was regarded as a very popular and extremely high-quality chief executive of BP’ — who was unlucky that a widget broke on the Deepwater Horizon rig and that Barack Obama used him
shamelessly as a scapegoat? I’m not so sure. More likely, the comeback-kid story promoted by Vallares’ spinmeisters was a way of drumming up media attention while serious institutions
and hedge funds figured Vallares as a smart play on rising energy demand for rather different reasons.


First, it’s a way of betting on Nat Rothschild, a less amiable personality than Hayward but one whose golden touch has already made him a billionaire. One of Rothschild’s apparent
skills is an ability to do deals with the kind of people who happen to control a lot of natural resources in emerging markets — such as the Russian oligarch Oleg Deripaska and the Bakrie
family in Indonesia. The latter are his partners in Vallar, the huge coalmining venture which started life as a cash shell barely a year ago and which Vallares is intended to replicate.

Many natural-resource owners around the world are in need of the sort of access to international capital markets that Vallares promises to provide, and Rothschild has indicated he will be scouring
Russia, Latin America and Africa for deals. But indigenous private-sector owners are wary of being ripped off by major western energy companies, or voracious Chinese ones. And on the other side of
the table, the likes of BP, scarred by its intractably hostile TNK-BP joint-venture experience in Russia, are inclined to prefer state-controlled partners, with whom negotiations are politically
complex but a deal once signed has a better chance of going forward unmolested. That, so the argument goes, leaves a gap for a smart new player like Vallares.

But its success, so one industry hard-hat told me this week, will depend on ‘quality of asset mix and working-level managers, rather than cult of personality’. Investors have been
reassured by the presence on the Vallares board of a couple of other oil veterans, Rodney Chase and Sir Graham Hearne, but as for Hayward, I suspect what most of the industry still thinks, as Tom
Bower wrote here a year ago, is that he’s ‘a good geologist but a weak leader’. He’s a decent bloke with a smaller ego than his BP predecessor Lord Browne, but as chief
executive his performance was, in the end, pretty lamentable.

If he was unlucky it was not so much because a catastrophic accident happened on his watch and he carried the can but because, on the Peter Principle, he had been promoted to a level that turned
out to be beyond his competence. It will be fascinating to see whether a controversial book due out next month, Spills and Spin: The Inside Story of BP by Reuters correspondent Tom Bergin, confirms
or reverses that judgment. Hayward’s Viren-like bid for personal gold may be the most interesting aspect of Vallares while it doesn’t yet have an oil and gas business to talk about, but
it’s hard to see him as its greatest asset.

Trainspotting

Speaking of brilliant exercises in spin, the Campaign for High Speed Rail has injected a lively element of north-south class warfare into the row — coming to a crescendo in the final weeks of
public consultation — about the route of the proposed £34 billion London to Birmingham line and the justification for building it at all. ‘Their lawns or our jobs’, the
slogan adopted by the militant Manchester wing of the campaign, deserves a prize for compressing the entire stand-off between northern economic-development advocates and Buckinghamshire nimbyists
into just five syllables. Even better, it turns out that the pro-HSR lobby is backed by Morrisons supermarkets and Greggs the chain baker, both prominent purveyors of the pies that satisfy northern
appetites. All we need now are Planet Organic and Patisserie Valerie to come out for the antis and we’ve really got a scrap on our hands.

Meanwhile Joe Rukin, founder of Stop HSR, says the only people on the pro side are ‘train spotters, big business and greedy politicians’. I am none of those, and I can’t quite
match either side for concision, but I happen to think a high-speed rail network is a mark of a civilised, progressive country, and that if another 20 years go by without one in Britain, our
long-distance transport infrastructure will collapse from over-crowding and under-investment. So I’m for guillotining the debate, raising the money and bringing on the bulldozers. But then my
lawn’s not in Buckinghamshire.


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