06 Jul
2003

Plenty of bottle for hard decision

IF THERE is something of a mercenary about Vivian Imerman, it is probably summed up in a comment he made recently on his approach to the way he conducts business. The chief executive and chairman of Scotch whisky group Kyndal once remarked: "I’m not in business to be popular, I’m in business to be effective. You can’t bank popularity, you can only bank cashflow."

Such cold sentiment will send a chill through the workforce at Kyndal, where Imerman’s plans for restructuring have put everyone on red alert. The South African’s review of the Whyte & Mackay to own-label operations has already led to the removal of five directors. Root and branch cutbacks are in the pipeline and will be announced within the next few weeks. Analysts believe the restructuring could mean the closure of one of the company’s two bottling plants.

Whatever the outcome, nobody should doubt Imerman’s willingness to take difficult decisions. He is also trying to take his stake in Kyndal from 35% to 60% by buying up shares from staff. Last week, in an interview with Scotland on Sunday, he insisted the move would not enhance his overall control of the business, claiming he already had "unfettered" day-to-day management authority. WestLB, the German bank which financed Kyndal’s £208m management buyout in 2001, had the final say on financial matters.

The balance of power, though, between Imerman and WestLB is intriguing, especially on closer inspection. One episode in the South African’s business past - when he lost control of canned food group Del Monte - is illuminating.

Imerman gained his global reputation as a tough businessman when he became ‘The man from Del Monte’ in 1992 through a reverse takeover deal. He engineered the transaction by placing shares in his own business, Royal Beech-Nut, and joined forces with Anglo American.

The combined financial firepower at his disposal proved too much for Del Monte which, at the time, had a turnover four times greater than Royal. Imerman grew Del Monte into an international business with a turnover of some £350m by 1998. But the business suffered from vicious competition in the European canned fruit market and that same year he agreed a £50m deal which saw Italian group Cragnotti & Partners, owner of the Cirio brand, take a 30% stake in Del Monte’s holding company Delhold.

Imerman saw the deal as a way to bring down Del Monte’s manufacturing costs and provide a further base for European expansion. But for Cragnotti it was a way of absorbing Del Monte into its own extensive operations. The two sides clashed over who owned the business and ultimately Imerman sold his stake in Del Monte to Cragnotti because he felt it was the right thing to do, not because he was forced out.

This time around he seems determined to become an immovable object. Although WestLB still holds the purse-strings for Kyndal, it will have little choice but to go along with Imerman’s plans if he becomes the sole major shareholder. By removing other managerial stakeholders from the equation, any internal opposition to Imerman’s radical plans for Kyndal will disappear.

Former chief executive Brian Megson, operations director Ian Palmer, human resources director Alan Mackie and head of logistics, Douglas Reid, have all been ousted. Sales director Iain Gilchrist will take a "part-time role" with the company from September. The old guard at the business, which inadvertently provided Imerman with his investment opportunity, has been unceremoniously swept away.

The controversy and uncertainty surrounding WestLB’s principal finance unit, headed by Robin Saunders, which led the Kyndal MBO, adds to Imerman’s sense of urgency. If WestLB ultimately chooses to sell the unit’s portfolio, he does not want to see the business change hands unless he is in the driving seat. One former colleague says: "He must have complete control over whatever he does. He will not tolerate dissent in the ranks."

As revealed by Scotland on Sunday in May, Kyndal’s growth prospects have been hampered by its debt repayments to WestLB. The group’s accounts - recently submitted to Companies House - show that in the last financial year it made an operating profit of £20.64m, but made interest payments of £20m. Of the interest-related charges, £5.36m reflected the amortisation of 86% of the cost of securing the loans. It is clear the business needs a kick-start.

Imerman has commissioned management consultants Bain & Co to conduct a major review of Kyndal’s operations. It is not the first time he has used Bain. In 1996 he used the firm to examine Del Monte’s business. Its findings led to a £45m overhaul of the group which included sweeping consolidation of its marketing and sales operations. More resources were then ploughed into Del Monte’s core brands.

He obviously liked the results of Bain’s work and it will give him the authority to make sweeping changes at Kyndal, which will almost certainly result in a significant reduction in the company’s 700-strong workforce in Glasgow, Leith and Grangemouth.

He has already stated that greater resources will be given to Kyndal’s brands, which also include Dalmore whisky and Vladivar vodka. The aim is to reduce Kyndal’s reliance on producing lower- margin supermarket own-brand whisky.

Imerman was born in South Africa, the grandson of Russian immigrants, and started working weekends with his grandfather at the age of 12. He went into business for himself when he was 20. His first venture was buying redundant chemicals from factories and selling them to other companies. His choice of trade was influenced by his father, who was a chemist.

He began a business law degree but never found the time to finish his studies. He then expanded into "insurance salvage" products. He would buy goods damaged in transportation, repair them and sell them on at a hefty profit.

But Imerman found his calling in selling branded pharmaceutical goods and listed his company on the South African stock exchange in 1987. Five years later he bought Del Monte and was on his way to international prominence.

Imerman is reputed to have invested over £10m of his own money into the Kyndal business and is married to the sister of Iranian billionaire Robert Tchenguiz, who is also an investor in the whisky group. Imerman’s investment in Kyndal was part of the £20m mezzanine cash injection by Roche - Tchenguiz’s investment vehicle.

Megson and his advisers only discovered Imerman was involved at the eleventh hour. Whether it would have made any difference to the deal had they known earlier about his involvement is now a moot point.

Colleagues and acquaintances know that Imerman is now in the box seat at Kyndal and anybody who is not prepared to dance to his tune is unlikely to have a future at the company.

Article Courtesy of The Scotsman
scotsman.com