Polly Peck
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[edit] Humble Beginnings
Polly Peck International (PPI) was, until around 1979, a profitable United Kingdom textile company. It began a dramatic revival in 1980s when Asil Nadir, a Turkish Cypriot, (the Sultan of Berkeley Square, as he was known), obtained a controlling stake in the company. Nadir intended to use PollyPeck, then a market capitalisation of about £300,000, as a stock market vehicle to expand his personal wealth. He turned PPI into a conglomerate by building upon the company’s basic operations. The share price has been the single best performing UK share of the 1980s - rising by a stunning 125,000% within a decade.
[edit] Massive Growth
In 1982 he began the early ventures, which includes Uni-Pac Packaging Industries Ltd, Voyager Kibris Ltd and Sunzest Trading Ltd, these three companies alleged to have been incorporated under Turkish administered Cyprus.
Uni-Pac Industries Ltd was a corrugated box manufacturer and packaging company formed to take advantage of surplus citrus fruit being grown in Cyprus which were formerly owned by Greeks-Cypriots before the partition and occupation of northern Cyprus by Turkey. Voyager Kibris Ltd was used to purchase the Sheraton Voyager Hotel in Turkey and to construct hotels in Northern Cyprus for its tourism industry.
In 1983, he also began significantly expanding PPI’s textile business by purchasing a 76 percent stake in Santana Inc. in the United States and a majority stake in InterCity PLC in the UK. Nadir then extended PPI’s textile operations into the Far East, acquiring a majority stake in Impact Textile Group in 1986, and by increasing PPI’s existing stake in Shuihing Ltd. to 90 percent, and in 1987 acquired a majority interest in Palmon (UAE) Ltd., a manufacturer of casual shirts.
In the early 1980s, PPI also diversified into the electronics business by acquiring 82 percent ownership in Vestel electronics, one of the largest publicly traded companies in Turkey. Vestel manufactured color televisions, video recorders(Betamax), audio equipment, microwave ovens, and washing machines. PPI’s success in the electronics business was substantially enhanced in early 1986 when Akai of Japan decided to join Ferguson, Salora, and Goldstar as licensors to Vestel. Subsequently, PPI also acquired housewares manufacturer Russell Hobbs.
It had become an international player by acquiring a majority stake in Sansui (A Japanese electronics company on hard times), Del Monte (The fresh fruit division as it had been divested from the more profitable canned fruit). Polly Peck bought the fresh fruit business from RJR Nabisco Inc for $875 million in 1989.
In less than ten years PPI’s market capitalization, from a growth by acquisition strategy, went from only £300,000 to over £731 million.
[edit] Collapse
Trading in the company’s shares was suspended on September 20, 1990. PPI’s problems were caused by the structure of the group’s debts. The company had over £100 million in short-term revolving lines of credit. Even more debt consisted of long term loans for which Nadir had offered Polly Peck’s shares as collateral. As the stock market declined, the value of these shares fell to less than one-fourth of the related outstanding debt. Polly Peck shares opened at 245 pence on September 20, 1990, within minutes the issue dropped more than 25 pence or ten percent. By 11.00am the share price dropped to 180 pence and by 2.20pm , when the shares were suspended, they had dropped to 108 pence. Moody’s credit rating downgraded PPI’s short-term and medium-term debt from Ba1 and Ba3 to Ba3 and B2.
With pre-tax profits of £161.4 million, net assets of £845 million and 17,227 employees, the Polly Peck group was one of Britain's top one hundred quoted companies. In Cyprus, after the state, he was the largest employer in the Turkish Republic of Northern Cyprus (TRNC) with 7,500 people dependent on his businesses.
When placed into administration Polly Peck run under Asil Nadir was found to have an almost complete lack of internal controls at its London office, allowing Nadir to transfer huge sums from the company's London bank accounts without question.
Ultimately the company collapsed, and charges were brought against Asil Nadir for 18 charges of false accounting and the theft of $48 million which he denied.
[edit] Skip bail
Nadir skipped bail (on a $5.5 million bond) fled the country and remains a fugitive in the unrecognized Turkish Republic of Northern Cyprus.
At the end of the controversy was the widely discredited Serious Fraud Office and the political establishment. A government minister resigned, denouncing prosecuting authorities. A high court judge and top QC were accused of a 'plot' to pervert the course of justice. The attorney general has to apologise for misleading parliament.
(His hotels were seized to pay off tax debts in 1994, while his Kibris Endustri Bank was taken over by the Turkish Cypriot central bank in 2002 because it was said to be a danger to the banking system. All that is left is the top-selling Kibris newspaper, the English-language weekly Cyprus Today, and TV and radio stations.)
