Polly Peck

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Polly Peck International (PPI) was, until around 1979, a barely profitable United Kingdom textile company. It was founded in 1940 by Raymond Zelker and issued shares in the 1970s. 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 bought the shares in Polly Peck at 9p per share owning 58%. He intended to use Polly Peck, then with a market capitalisation of just under £300,000, as a stock market vehicle to expand his personal wealth.

On 7 July 1980, he was appointed as chief executive. He turned PPI into a conglomerate by building upon the company’s basic operations and expanding.

[edit] Massive growth

8th July 1980 marked the beginning of the company's growth with a rights issue of 1.5 million shares at 85p per share to raise capital for investments abroad.

In 1982 Nadir began the early ventures, which included Uni-Pac Packaging Industries Ltd, Voyager Kibris Ltd and Sunzest Trading Ltd, three companies alleged to have been incorporated under Turkish occupied 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 was forecast to produce a minimum of £2.1 million profit. 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 September 1982 Nadir acquired a major stake of 57% in a Jewish owned textile trader, 'Cornell', whose shares were considered penny shares. They increased from 26p to over 100p as soon as Nadir's interest was confirmed. He used 'Cornell' to set up the 'Niksar' mineral water bottling plant in Turkey. By issuing a rights issue raising £2.76 million plus a further £6 million from Polly Peck, to sell an estimated 100 million bottles of water to the Middle East.

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 April 1984, 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, Betamax video recorders, air conditioning units, 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.

By 1989 Polly Peck had become an international player by acquiring a 51% majority stake in Sansui (a Japanese electronics company on hard times) becoming one of the first foreign acquisition of a major Japanese company listed on the Tokyo Stock Exchange. Del Monte (The fresh fruit division 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. It then gained the ultimate accolade of being admitted to the Financial Times 100 Share Index in 1989.

By 1990 five firms had emerged as the dominant actors in fresh fruits and vegetables in western Europe and North America, these were the ex-banana giants: Chiquita, Dole, and Del Monte Tropical and the two new upstarts: Polly Peck International and Albert Fisher. The move was part of a larger planned restructuring under which Polly Peck will develop its electronics, foods and leisure businesses into three, largely independent companies.

In less than ten years PPI's market capitalization, from a growth by acquisition strategy, went from only £300,000 to £1.7 billion at its peak. It became a holding company for a world wide group of over 200 direct and indirect subsidiary companies.

[edit] Collapse

Until the Serious Fraud Office (SFO) raided his South Audley Management, the company that controlled the Nadir family interests. The raid triggered a run on the shares with the price practically in free fall.

Trading in the company’s shares was suspended on September 20, 1990. PPI’s problems became apparent 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 occupied area of Cyprus 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.

In 1991 Polly Peck Group transferred all of Vestels electroincs shares to one of its subsidiaries named Collar Holding BV based in the Netherlands and in the same year, following the collapse of the Polly Peck Group, the Company was placed in administration. In November 1994 Ahmet Nazif Zorlu acquired the Company from the administrator of the Polly Peck Group by buying the entire share capital of Collar Holding BV which at the time held 82% of the Company’s issued share capital.

Many subsidies were profitable and were taken over by their respective managements or sold to larger competitors. For example: Sale of Mendelson-Zeller Co., Inc. to the Diehl Group (fruit and vegetable brokerage company). Sale of Signal Farming to Signal Agricultural Holdings, Inc. (farming produce). PMI Marketing International (food importing, exporting & distribution), became a management buyout by the Prevor Family. Standard Fruit & Vegetable Co. (food distribution) by Chase Bank and management.

[edit] Leaving the UK

Nadir left the UK just after his £3.5 million bail had lapsed, while the detectives who were watching him had been taken off the case to avoid paying them overtime for working on a bank holiday. He remains a fugitive in the unrecognized Turkish Republic of Northern Cyprus. Peter Dimond, the pilot who flew him out of the country, was convicted of helping him depart the country illegally but the conviction was quashed once it was determined that the bail had lapsed[1].

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 a QC were accused of a 'plot' to pervert the course of justice. The attorney general had 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.

[edit] External links

• History of the company
• Guardian report on recent developments
• Suit against Nadir
• New York Times report from 1990
• Original auditors for the collapse of Polly Peck International.
• On his self imposed exile to Northern Cyprus.
• Polly Peck's acquisition of Sansui Electronics
• auditors in Cyprus investigates Polly Peck