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  Barclay Watch Media UK Analysis


Britain's Billionaire Barclay Twins Use Stealth to Amass Empire

Posted: 2004-12-06
From: Bloomberg
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Nov. 30 (Bloomberg) -- In 1993, billionaire twins David and Frederick Barclay paid 2.33 million pounds ($4.3 million) for the English Channel island of Brecqhou, 80 miles off the U.K.'s southern coast, to build a compound for their families.

They erected a castle, complete with a helipad and gilded turrets, and sued to change the 1565 constitution, which required that the eldest son inherit the property. David Barclay, now 70, estimated that the legal effort alone cost 1.75 million pounds.

``One feels one's being bullied at times,'' says Michael Beaumont, 76, the feudal lord who oversees Brecqhou and neighboring Sark, which are dependencies of the British Crown, and who fought the Barclays' law-changing campaign. ``They couldn't have done it without their money.''

The 665 million pound purchase in July of the U.K.'s Daily Telegraph, the nation's largest broadsheet, leaves the brothers struggling to maintain the privacy that they've relied on to build a business empire out of the public eye. During the past four decades, the twins have bought companies that others reject or overlook, developing the real estate and selling off pieces for quick profits.

The strategy has allowed the sons of a west London-based traveling salesman and a candy store operator to own more than 50 companies in the U.K., Japan and Sweden and gain stakes in at least a dozen more. Among the family's trophies: London's Ritz hotel and a 244-foot yacht that Aidan Barclay, David's eldest son, purchased from Oracle Corp. Chief Executive Officer Larry Ellison in 2004 and renamed Enigma.

$7.5 Billion in Revenue

In the U.K. alone, the Barclays' interests generate more than $7.5 billion in annual revenue and employ more than 40,000 people, according to regulatory filings and court documents. In Monte Carlo, the Mediterranean resort where the Barclays have their official residence, they own English-language Riviera Radio and the four-star Hotel Mirabeau, a seven-minute helicopter ride along the Cote d'Azur from Nice's airport.

In buying the Telegraph, which celebrates its 150th anniversary in 2005, the Barclays beat 11 contenders. Among them was London-based Apax Partners Worldwide LLP, Europe's biggest buyout firm. Their titles, which include the Edinburgh-based Scotsman, reach 975,000 readers each weekday, thrusting the Barclays into the spotlight as the No. 5 newspaper publisher in the U.K.

Bermuda to Jersey

At the same time, their holding companies are based in Bermuda and the British Virgin Islands, where international companies pay no corporate taxes, and in the Channel Island of Jersey, where international companies pay a 0.5 percent tax on profits of more than 10 million pounds.

Because the Barclays' companies are privately held, they're subject to limited disclosure. The U.K.'s 1985 Companies Act requires only annual filings of profit and loss statements and balance sheets 10 months after the financial year ends.

Aidan Barclay, 48, CEO of the Barclays' U.K. interests, says the family intends to keep its dealings private.

``We do not consider our financial, business or charitable affairs to be of public interest as we are not answerable to shareholders, or indeed members of the public,'' he wrote in response to requests for interviews for this story. ``We would prefer if you did not write about us at all.''

The Barclays and their shuttered world landed in the headlines with the Telegraph.

Behind-the-Scenes Deal

The brothers paid 9.7 million pounds more than their nearest rival in an auction for the paper, after Chicago-based Hollinger International Inc. sued to prevent them from completing a behind- the-scenes deal with controlling shareholder Conrad Black. The price tag was more than triple the $326 million they'd negotiated with Black to take control of Hollinger Inc., the company that controls Hollinger International.

As editorial standard-bearer for Britain's Conservative Party, the Telegraph gives the Barclays -- who were knighted by Queen Elizabeth II in 2000 for their charitable donations -- influence over national politics. The paper adds mass-market appeal with society and sports coverage and columnists such as celebrity cook Nigella Lawson, daughter of former Conservative Chancellor of the Exchequer Nigel Lawson.

``It's like a combination of the New York Times and the New York Post,'' says Thomas Lee, who runs Boston-based Thomas H. Lee Partners LP, the world's fourth-biggest buyout firm. Lee, 60, says he considered bidding for the Telegraph.

Transparency

Rupert Murdoch's London-based News International Plc, publisher of the Times and the Sun, is No. 1 in U.K. readers, with 4 million on weekdays and Saturdays and 5.1 million on Sundays, according to the U.K.'s Audit Bureau of Circulations.

The purchase also exposes how little the public knows about the Barclays or their businesses, says Jermyn Brooks, a Berlin- based director of Transparency International, a nongovernmental organization that monitors corruption and promotes accountability.

``Even if a company is privately owned, if it's large, it has in good practice -- if not in law -- obligations to be transparent,'' says Brooks, 65, who from 1998 to 2000 was a global managing partner of New York-based PricewaterhouseCoopers LLP, one of the world's four biggest accounting firms.

For media companies, which need to engender public trust, that pressure may be greater. ``The Daily Telegraph is recognized as one of the more-serious mass-circulation papers in an important democracy,'' Brooks says. ``There is a justified interest in how it is owned and what potential influences there are as a result of that ownership.''

`Stealth Buyers'

Martin Bell, 66, an independent member of the U.K. House of Commons from 1997 to 2001 and a British Broadcasting Corp. war correspondent for three decades, says there's no evidence the Barclays will dictate editorial policy at the Telegraph. ``Their style is very hands-off,'' he says.

Charles Sherwood, who has competed with the Barclays on acquisitions, says privacy gives the brothers an advantage.

``They are very effective stealth buyers,'' says Sherwood, 45, a partner at London-based Permira Advisers Ltd., manager of the 5.1 billion euro ($6.8 billion) Permira Europe III fund, Europe's biggest buyout fund. ``They come out of nowhere and move quickly.''

Sherwood says Permira had looked at buying Littlewoods Plc's 120 department stores when the Barclays agreed to acquire the entire company for 750 million pounds in 2002.

Since at least 1983, the brothers have made more than 15 multimillion-dollar deals without tapping a public debt or equity market for financing. They use investment bankers sparingly and borrow from a small group of lenders that includes Edinburgh- based HBOS Plc.

Information Flow

The banks don't widely syndicate, or sell off, the loans. Peter Fleming, 60, a former managing director of global loans at Barclays Plc in London, the U.K.'s third-largest bank, says the strategy limits the flow of information to rivals. Barclays Plc isn't connected with the Barclay twins.

HBOS, which was formed in 2001 by the merger of Halifax Group Plc, the U.K.'s biggest mortgage lender, and Bank of Scotland, Scotland's No. 2 bank, has financed at least two Barclay purchases in addition to the Telegraph. Before that, Bank of Scotland financed at least two other acquisition attempts by the brothers.

HBOS backs other billionaires. In 2002, HBOS lent Philip Green 880 million pounds for his 850 million pound takeover of London clothing retailer Arcadia Group Plc. Earlier this year, Green, 52, made an unsuccessful 9.1 billion pound hostile bid for Marks & Spencer Group Plc, Britain's largest clothing chain. HBOS also backed that bid.

`Good Weapon'

Peter Cummings, HBOS managing director in charge of leveraged lending, declined to comment on the bank's relationship with the Barclays.

Privacy also helps the brothers generate cash, says Robert Bugbee, who worked for the Barclays from 1988 to 1995 in business development at Gotaas-Larsen Shipping Corp., a Monaco-based oil and liquefied natural gas transporter.

``That's a very good weapon,'' says Bugbee, 44, who's now president of Stamford, Connecticut-based OMI Corp., the third- largest U.S. owner of oil tankers. ``One of the greatest pressures in public companies is the pressure on management to make quarterly results, and they don't necessarily go hand in hand with good cash returns.''

To John Peyton, a Conservative member of Britain's House of Lords who chairs the David and Frederick Barclay Foundation charity, there's a simpler explanation for what motivates the brothers.

Careful Spenders

``They have memories,'' says Peyton, 85, who has known the brothers almost 20 years and has directed the foundation's 15 million pounds of charitable donations. ``They were once very poor themselves. They don't waste money; they spend it with care.''

David Barclay, in an e-mail to Bloomberg News, says: ``It doesn't appeal to us to boast to others of how clever we have been or how successful we are.''

The Barclays grew up in Hammersmith in west London. They were born into a household so close to a railroad that trains rumbling by could rattle the windows. Their father was born in Glasgow. The twins tapped into their Scottish heritage, establishing their relationship with HBOS and receiving honorary degrees from Glasgow University in 1998.

``They are outstanding examples of the modern Scottish ability to combine geographical mobility with fidelity to Scotland,'' Richard Trainor, a former professor at Glasgow University, said when he announced the awards.

Interior Decorators

World War II, which ended when the twins were 10, disrupted their schooling. They didn't go to college, Trainor said in his address.

By 1955, when David married, the twins were working as interior decorators. A decade later, they had become real estate agents and started buying and fixing up hotels. By the 1970s, they owned such London landmarks as the Lowndes Hotel, between Harrods department store and Belgrave Square, according to the U.K.'s Land Registry.

The twins avoided potential ruin in the mid-1970s. They'd set up a company called Barclays Hotels Ltd. in London and planned to take it public. In 1968, they started borrowing from the Crown Agents, a branch of the U.K. government formed in 1833 to procure goods for colonies of the British Empire that later expanded into corporate lending.

By 1974, the Barclays owed 9.5 million pounds to the agency. That year, a collapse in U.K. stocks and real estate sparked by the Middle East oil embargo left the Crown Agents with 212 million pounds of losses, according to a government inquiry published in 1977. The Crown Agents called in its loans, threatening dozens of borrowers.

Barclays Spared

The Barclays defaulted and almost lost everything. Under pressure to resolve the scandal, the government drafted John Cuckney, a former Lazard Brothers & Co. banker, to sort through the loans. He let some borrowers off instead of foreclosing. The Crown Agents sold Barclays Hotels' bad debts for 3 million pounds in 1976, sparing the brothers by taking a loss on the remaining 6.5 million pounds, according to the government investigation.

The report faulted the Crown Agents for lending to the Barclays. The brothers had refused to explain a profit forecast that was crucial and allowed Henry Kaye, a lawyer representing the Crown Agents, to invest in the Barclays' business. Jack Walker, another lawyer who represented the Crown Agents, also was a director of a Barclay-owned company, according to the report.

``I don't want to talk about that,'' says Kaye, 85. Walker, 70, and living in Boulder, Colorado, also declined to comment.

`Close to Going Broke'

``The Barclays were close to going broke, but they were cleverer than me,'' says Ramon Greene, 73, a property developer who knew the twins and himself went bankrupt in the collapse of the Crown Agents. ``I don't know how they managed it.''

Even after the Crown Agents debacle, the Barclays drew little attention in their roles as London hoteliers. That changed in 1983, when the twins, then 49, paid 47 million pounds for Ellerman Lines Plc, a London-based shipping company that also owned taverns, breweries and a travel business.

Ellerman gave the Barclays a platform to exhibit their individual styles and mold their strategy of buying companies, breaking them up and profiting from the real estate.

``Even though they're identical twins, they're different,'' says Anthony Cooke, who ran Ellerman's shipping unit. ``David Barclay was more attuned to taking a risk, and Frederick was generally willing to have a look but would never bet the farm. It worked very well.''

David, the older twin by 10 minutes, according to their birth certificates, and Frederick held luncheon meetings at London's Howard Hotel, which they owned at the time. Cooke says the brothers never touched alcohol during business hours.

Company in Trouble

When the Barclays started looking at Ellerman, the company was in trouble. John Ellerman, who'd inherited the business from his father, died in 1973. In 1982, the shipping unit lost almost 8 million pounds, reeling from a decline in world trade.

When Morgan Grenfell & Co., the London-based merchant bank that Ellerman had hired, failed to find a buyer, the Barclays stepped in. Cooke recalls the brothers negotiating with Ellerman's widow, Esther, a friend from Monaco, before presenting their offer.

``It was a very good deal for them,'' says Cooke, 63, who laments failing to arrange financing for a higher bid. ``There had been very little interest from everyone else, which was very odd.''

Ellerman Profit

In 1985, Cooke, who'd stayed at Ellerman after the Barclays' purchase, led a management buyout of the shipping unit. He declines to disclose the price. The brothers sold Ellerman's travel business to Baldwin Plc for 3.9 million pounds in stock in 1988.

In 1989, Brent Walker Group Plc bought Ellerman's breweries and 855 taverns for 239 million pounds. That deal alone brought the Barclays more than five times what they had paid for the entire company. Greene, the property developer, says the Barclays spotted value in Ellerman's real estate that other bidders must have overlooked.

Peyton, head of the Barclays' charity, first met the brothers when they were splitting up Ellerman and he was raising funds for London Zoo. He says he and the twins sat down in the summer of 1985 at a lunch arranged by Alistair McAlpine, then treasurer of Margaret Thatcher's Conservative Party. During the course of the meal at McAlpine's art gallery on central London's Cork Street, the Barclays proposed a 500,000 pound donation.

``I never had such an offer before or since,'' says Peyton, recalling the understated manner with which the brothers mentioned the sum. The zoo named its central plaza Barclay Court.

Imperial Takeover

Michael Rendle, who fought the Barclays in a hostile takeover of Imperial Continental Gas Association soon after, remembers a similar assuredness during an encounter with David Barclay.

London-based Imperial Continental, where Rendle was vice chairman, owned a rural gas distributor, Calor Group Plc, and stakes in oil companies such as Belgium's Petrofina SA. By October 1986, the Barclays had taken an 11 percent stake through Gulf Resources & Chemical Corp., a Boston-based company they controlled. They paid as little as 345 pence a share, according to the November 1986 offer document.

After Gulf offered to buy Imperial Continental for 750 million pounds in October 1986, Rendle invited David Barclay to discuss the brothers' plans. They gathered at Imperial Continental's City of London offices over tea.

``I said, tongue in cheek, that it's always good to welcome big shareholders,'' Rendle, 73, recalls. ``David, who was very charming, smiled and said he had other things in mind.''

`Wall Street-Style'

Imperial Continental rejected the Barclays' offer. A month later, in November, the twins mailed their bid, which was equal to 530 pence a share, directly to shareholders.

The acquisition never went through: Eighty members of the House of Commons signed a motion opposing the ``Wall Street-style leveraged breakup.'' Eight banks, including Bank of Scotland, the bank that merged to form HBOS, had agreed to lend Gulf Resources 90 percent of the purchase price, according to the offer document.

Another 120 members demanded a review of the offer by the U.K. Monopolies and Mergers Commission, which ruled on antitrust issues until the U.K. Competition Commission replaced it in 1999.

``It was pretty clear that we were up against the might of the establishment,'' says Brian Basham, 61, who advised the Barclays on public relations.

When the commission took on the case, the brothers withdrew. Imperial Continental agreed to split itself up, boosting its shares to 626 pence on Feb. 23, 1987, and giving the Barclays a paper profit of 27 million pounds from their stake.

Return to Shipping

In 1988, the Barclays returned to shipping, buying Gotaas- Larsen for $670 million. Like Ellerman, Gotaas-Larsen was searching for a buyer. Peter Stokes, a director of finance at Lazard LLC in London, figures the brothers retreated from the spotlight after being tarred as raiders in the Imperial Continental case.

``Private capital still controls the majority of the shipping industry,'' he says. ``It's an industry where you can maintain discretion.''

The brothers sold Gotaas-Larsen to Osprey Maritime Ltd. in 1997 for $750 million, giving them a paper profit of $80 million. The Barclays were ``straightforward and uncomplicated,'' according to former Osprey Chairman Tim Cottew, 57.

``They knew what they wanted,'' Cottew says. He remembers the Barclays buying and selling oil tankers, some for as much as $60 million apiece, to profit on price swings. Long-term contracts to carry liquefied gas provided Gotaas-Larsen with a steady flow of cash.

Osprey Investment

The Barclays remained investors in Osprey. When Cottew defaulted on a loan from the brothers, he forfeited his stake in Osprey, increasing the Barclays' shareholding to almost 24 percent in 1998. Then Norwegian shipper John Fredriksen acquired a bigger stake, and Cottew arranged a meeting with Frederick Barclay at London's Carlton Tower hotel to plan Osprey's future.

At lunch a few weeks later, Fredriksen picked up his mobile phone and called Frederick Barclay to make an offer for the brothers' shares. Tor Olav Troim, an associate of Fredriksen's who was sitting at the table, watched the deal unfold.

``There was a little bit of back and forth,'' he says. In minutes, Fredriksen agreed to pay about $45 million.

Even as the Barclays thrived in shipping, the lure of newspapers was exerting its pull. In 1986, Black, a Canadian businessman who published a handful of dailies, took control of the Daily Telegraph. Not long after, David Barclay met him at a dinner and inquired about buying the paper, Frederick Barclay recalled in a February 2004 Delaware Chancery Court deposition related to the Telegraph sale.

Drawing Room Passport

Black turned away David Barclay's advance. ``Conrad always said the last thing he would ever do is sell the Telegraph,'' says Jeremy Deedes, 61, who retired in October as CEO of Telegraph Group Ltd. ``It's the passport to other people's drawing rooms.'' Black, through a spokesman, declined to comment for this story.

Bell, the former Parliament member and war correspondent, says the Telegraph serves as the ``house organ'' of the Conservatives, who have been out of power since Labour Party leader Tony Blair became prime minister in 1997. ``It's to the right,'' he says.

In an Oct. 6 editorial, the paper praised party leader Michael Howard's speech at the Conservative conference in Bournemouth, on England's southern coast.

``Conservatism is coming back into vogue,'' the paper said. ``Now it is up to the Conservatives to harry Labour from office.'' Blair must call a general election by June 2006.

Newspaper Quest

The Barclays succeeded in their newspaper quest in 1992, acquiring the European, a paper that Robert Maxwell, owner of the Daily Mirror, had started in 1990. The investment flopped. Maxwell wanted a pan-European readership rivaling that of the Financial Times and the International Herald Tribune.

After Maxwell drowned off the Canary Islands in 1991, the Mirror's parent, Mirror Group Plc, discovered that more than 400 million pounds was missing from the company's pension fund.

In 1993, while the European was recovering from the Maxwell scandal, the brothers bought Brecqhou. They rented cranes and a Chinook helicopter and hired more than 1,000 workers to erect the family castle and landscape the 158-acre island with trees, bushes and flowers. The efforts astonished the 591 inhabitants of neighboring Sark, veterans of the English Channel's gales.

``We didn't think the plants would survive the first winter,'' says Reg Guille, the 62-year-old president of Sark's Parliament and the island's judge.

The European

During the next half decade, the European foundered. The Barclays folded the paper in 1998, losing about 70 million pounds. ``There were all sorts of difficulties,'' says Charles Garside, who became editor when the Barclays took over and encountered hurdles distributing the paper across Europe. ``It was never a tried-and-true business.''

The Scotsman had more of the right attributes. Founded in 1817, the paper was making money when the Barclays bought it for 85 million pounds in 1995 from Canada's Thomson Corp. The Barclays focused on the Scotsman's real estate, selling its historic Edinburgh site to hotel developers and spending more than 15 million pounds to build a new headquarters.

The twins installed Aidan Barclay to oversee the paper as chairman of Scotsman Publications Ltd. Alan Ruddock, editor from 1998 to 2000, says David Barclay contacted him directly only once. Frederick never got in touch.

Failed Attempts

The twins failed in attempts to buy more dailies, Aidan testified in Telegraph sale court proceedings in 2004. In 2000, they lost London's Daily Express to Richard Desmond, who at the time published pornographic magazines such as Asian Babes. They also made an unsuccessful offer for the Glasgow Herald.

``We thought it was no great secret that we would like to expand our newspaper activities in the U.K.,'' Aidan said during his deposition.

The Barclays revived their taste for breakups like Ellerman and Imperial Continental. In 1999, they found one.

Sears Plc, then the U.K.'s fifth-largest clothing retailer, had businesses ranging from women's wear to mail-order shopping. The brothers teamed with Philip Green, another neighbor from Monaco, and lined up financing from Bank of Scotland and Bank of Boston to buy the company for 548 million pounds. Green and the Barclays recouped the purchase price in less than 12 months by selling some of Sears's real estate and its three retailing units.

`Thrill of the Chase'

``Why do they go on? It's the thrill of the chase, the thrill of doing a deal,'' says Max Kingsley, who relied on the Barclays' backing to complete a management buyout of casino operator London Clubs International Plc in 1989. ``That's where they got their buzz and still get their buzz. It would eat up most people's adrenaline, doing deals the size of theirs.''

Kingsley, 71, recalls meeting the Barclays before the buyout on Cunard Line Ltd.'s Queen Elizabeth 2, the world's largest ocean liner at the time, when London Clubs ran the onboard casinos. ``I've never known them to seek publicity,'' Kingsley says. ``They don't want a high profile. They're very happy to be out of the limelight.''

After Sears, the Barclays set their sights on Littlewoods, which sold clothing, food and appliances in about 120 department stores and by catalog. In 1984, David Barclay had approached the owners, the Moores family of Liverpool, where the company is based. They turned him down. When the brothers offered 750 million pounds 18 years later, the family agreed.

Mail-Order Retailing

HBOS financed the deal, lending the entire purchase price and taking a 5 percent stake, the bank said in a 2002 press release. HBOS didn't widely syndicate the loan.

``That's helpful if you want to be private,'' says Fleming, the former banker at Barclays Plc. ``Banks don't know about your affairs because your loans stay out of the syndication market.''

A year later, the Barclays added to their retail holdings by buying GUS Plc's catalog unit and a business that delivers packages for 590 million pounds. They combined GUS with Littlewoods to form a company that dominates U.K. mail-order retailing with a market share of more than 30 percent, 32,000 employees and 3.5 billion pounds in 2002 sales.

In their statement to the U.K. Competition Commission, the Barclays said merging Littlewoods and GUS would save 58 million pounds a year in expenses, almost as much as Littlewoods alone had made in 2002 operating profit.

``They buy businesses related to businesses they already own, so they compete on the basis of synergy,'' Permira's Sherwood says.

Second Telegraph Offer

In May 2003, the Barclays returned with a second offer for the Daily Telegraph -- about 17 years after they'd first approached Black. This time, they weren't so easy to dismiss. The brothers were billionaires, and Black was facing a cash crunch.

Shareholders of Hollinger International were revolting over $275 million that Black; his wife, Barbara Amiel Black; and four associates had received to run Hollinger International, then publisher of the Telegraph, the Chicago Sun-Times and the Jerusalem Post.

Hollinger International ousted Black as CEO in November 2003 after investigating the payments. Earlier this month, the U.S. Securities and Exchange Commission sued Black, his former deputy David Radler and Hollinger Inc., accusing them of looting $85 million from Hollinger International.

David Barclay opened his foray for the Telegraph with a May 23, 2003, fax on Monaco letterhead that featured his address in cursive script and PRIVATE AND CONFIDENTIAL stamped on it. ``I wish to register our interest should you contemplate any serious change in your U.K. interests,'' he wrote.

Black replied in a May 29, 2003, fax: ``Conditions are quite manageable. No assets are for sale.''

Hollinger Gambit

David Barclay kept pestering. In November, Black agreed to discuss an offer. Most of the talks were long-distance. Barclay was in Monte Carlo, Switzerland or Brecqhou, from which he sent faxes on paper that bore a map of his island. Black was in New York, London or Toronto, court documents show.

In his depositions, Aidan Barclay said the family did almost no due diligence. By Jan. 17, 2004, Black and the Barclays had a deal. The brothers would pay $326 million for Black's Hollinger Inc., the Canadian company Black used to hold his 30 percent stake in and voting control over Hollinger International.

While the Barclays and Black were in discussions, Hollinger International's board was pursuing a sale on its own and had hired Lazard to solicit bids. The directors learned that Black had struck a secret agreement when the Barclays issued a press release on Jan. 18.

`His Own Interest'

``Lord Black was negotiating his own interest and not the interest of the company,'' Raymond Seitz, a Hollinger International director and former U.S. ambassador to the U.K., said during a deposition after Hollinger International sued Black. The Jan. 26 complaint claimed Black had violated an agreement not to undermine Lazard's sale efforts.

On Feb. 26, Delaware Chancery Court Judge Leo Strine blocked the Hollinger Inc. sale, forcing the Barclays to join an auction for the Telegraph. Their bid beat contenders including Daily Mail & General Trust Plc, publisher of the London-based Daily Mail; and a joint bid by 3i Group Plc, Europe's largest publicly traded venture capital firm, and Veronis Suhler Stevenson LLC, a New York-based buyout firm that manages more than $1.5 billion.

Strine speculated about why the brothers were willing to pay a 9.7 million pound premium. In a ruling on the fairness of the Telegraph auction, he wrote:

`Trophy' Investment

``The `trophy' nature of the Telegraph Group means that there are some buyers -- including, I discern, the Barclays, who run a private, not public, company -- who are willing to pay a higher price than expected cash flows suggest is prudent, in purely economic terms, in order to own the Telegraph and to enjoy the prestige and access to the intelligentsia, the literary and social elite, and high government officials that comes with that control.''

The Barclays have their work cut out for them at the Telegraph. The paper needed a new $185 million printing plant even before the auction. Telegraph subscribers are the oldest readers of any British daily, and their numbers are declining. In the six months ended on Oct. 31, weekday circulation fell 1.9 percent to 905,889. At Murdoch's Times, circulation rose 3.5 percent to 654,913, after the paper started a tabloid-size edition in 2003.

Murdoch, the billionaire chairman of New York-based News Corp., plans to invest 600 million pounds in production plants and full-color presses for the Times.

Wine Collection

Marco Sodi, head of Veronis Suhler in Europe, says the Barclays can fund some of the improvements to the Telegraph by selling off wine valued at 158,000 pounds in the paper's cellars that Black had kept for executive lunches.

In October, the Barclays named a new CEO for the Telegraph: Murdoch MacLennan, 55, former head of Daily Mail & General Trust's U.K. newspapers. MacLennan probably can count on a lot of latitude in running the paper, says Ruddock, the former Scotsman editor. All the Barclays seek from editors is opposition to Scottish independence, support for free markets and skepticism of the European Union, he says.

``They were the best people to work for,'' says Cooke, who ran Ellerman's shipping unit. ``You always knew where you stood. They started off by trusting me, and I trusted them.''

The twins are giving more responsibility to Aidan. At the Telegraph trial, Frederick Barclay testified that David was so exhausted that he had to dictate rather than type many of his letters to Black during negotiations for the paper. David cited his health in refusing to be deposed for the Delaware trial.

``The brothers built an impressive empire,'' Ruddock says. ``Aidan needs to show them he is worthy of inheriting it.''

Fighting Tradition

Among the most treasured assets is Brecqhou. The windswept slab of granite, bracken and brush 25 miles off France's Normandy coast had a lone farmhouse when the brothers bought it. Building the castle probably cost between 40 million pounds and 60 million pounds, says Jonathan Brannam, one of Sark's 37 landowners.

When the Barclays arrived, Sark's medieval inheritance law prevented them from willing the island and the castle equally to their four children. The law of primogeniture on Sark dictated that all property had to be left to the eldest son. David has two sons in addition to Aidan: Howard, 44, and Duncan, 43. Frederick has one daughter, Amanda, born in 1978.

``The feudal rights of primogeniture inevitably tend to disrupt a harmonious family life,'' the brothers complained to the Strasbourg, France-based European Court of Human Rights in 1998, the case with which Beaumont became involved.

In 1999, the dispute over hereditary rights ended in a draw, with Beaumont agreeing properties may be left to a single child of the parents' choice, man or woman. In turn, the brothers recognized Sark's authority over Brecqhou in 2000.

Glare of Publicity

Some friction persists. The Barclays campaigned for and won exemptions from Sark's wealth tax, a maximum of 3,500 pounds a year, saying they didn't use the island's services. Brannam figures Sark's property tax costs them about 17,500 pounds a year.

``They've been cleverly advised by the lawyers and the accountants,'' Transparency International's Brooks says.

The Barclays are winning over some of their neighbors. They've let Sark use their helicopter and rescue boats for evacuations and have donated 200,000 pounds toward a new school. ``It comes down to money at the end of the day,'' says plumber Alan Blythe, resting his elbow on the bar at the Bel Air Inn, one of Sark's two pubs.

The Barclays' role as proprietors of the Telegraph may be harder to reconcile than their ownership of craggy Brecqhou. As the billionaire brothers savor the trappings of wealth and tend their empire from afar, they may find the glare of publicity can penetrate even the thickest castle walls.

To contact the reporters on this story:
Simon Clark in London  [email protected]
Erik Schatzker in Toronto at  [email protected].

To contact the editor responsible for this story:
Ronald Henkoff  [email protected]

---------------------------
Note From Mathaba.Net

'Barclay Watch' has much information about the reclusive Barclay Twins (Sir David and Sir Frederick Barclay) on file. For reasons of public interest and their role in ownership of the Telegraph Group, which we also watch closely, we seek any and all information about the Barclays. Please use the encrypted contact form at Mathaba.Net to send us information, requests for non-disclosure of source will be honoured.
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