Polly Peck

Polly Peck began in 1940 as a small British fashion house established by Raymond and Sybil Zelker. Sybil designed the clothing while Raymond managed the commercial side of the business. After struggling during the late 1970s, the company became the vehicle for a dramatic acquisition-led expansion under Asil Nadir, whose company Restro Investments acquired a controlling stake in 1980. Nadir became chief executive on 7 July 1980, and a rights issue launched the following day provided new capital for overseas investment. During the 1980s, Polly Peck changed from a modest clothing business into a complex international holding company. Its expansion included packaging, hotels, bottled water, textiles, consumer electronics, housewares and fresh fruit. Among its important investments were Uni-Pac Packaging Industries, Voyager Kibris, Sunzest Trading, Cornell, the Niksar mineral-water operation in Turkey, Santana in the United States, InterCity in the United Kingdom, Impact Textile Group in the Far East, Shuihing, Palmon in the United Arab Emirates, Vestel Electronics in Turkey, Russell Hobbs, Sansui of Japan and the former Del Monte fresh-fruit division. Vestel became one of the group’s most significant industrial assets and manufactured televisions, video recorders, air-conditioning equipment, audio products, microwave ovens and washing machines under licensed brands. The group’s growth was exceptionally rapid. Its market capitalisation reportedly rose from approximately £300,000 to a peak of about £1.7 billion in less than a decade. By 1989, Polly Peck controlled or held interests in more than 200 direct and indirect subsidiaries, employed more than 17,000 people and had become a constituent of the FTSE 100 Index. Its reported pre-tax profit was £161.4 million and reported net assets were £845 million. The group was also one of the largest employers in Northern Cyprus after the state itself. The expansion model depended heavily on acquisitions, international transfers of funds and extensive borrowing. In August 1990 Nadir announced an intention to take Polly Peck private, then reversed that decision later in the same month. Regulators and auditors subsequently scrutinised large transfers from the British parent to subsidiaries in Turkey and Northern Cyprus, as well as transactions involving nominee companies and assets whose ownership had not been transparently recorded. The Serious Fraud Office raided South Audley Management on 20 September 1990, prompting a collapse in confidence and suspension of trading in Polly Peck shares. The group had substantial short-term credit lines and longer-term borrowing secured against Polly Peck shares. A provisional liquidation order was obtained in October 1990, after which the directors pursued voluntary administration. Polly Peck ultimately collapsed with debts reported at approximately £1.3 billion. Its failure became one of the most prominent British corporate scandals of the period and contributed to pressure for stronger company-law, audit and corporate-governance safeguards. The episode is associated with the development of the early UK Corporate Governance Code. Nadir left the United Kingdom in 1993 after his bail arrangements lapsed and travelled to Northern Cyprus, which had no extradition agreement with Britain. He returned to the United Kingdom in August 2010 after securing bail arrangements that included electronic monitoring. In 2012 he was convicted at the Old Bailey on ten counts of theft involving nearly £29 million from Polly Peck and was sentenced to ten years in prison. The original Polly Peck group no longer operates as an independent business. In 1994, Ahmet Nazif Zorlu acquired the company from its administrator through the purchase of Collar Holding BV, which held the group’s interest in Vestel.

Polly Peck was founded in 1940 by Raymond and Sybil Zelker as a small fashion house in Britain. The couple divided responsibilities between design and business management. By the end of the 1970s, the company was experiencing difficulty and was vulnerable to a change in control. Restro Investments, a company controlled by Asil Nadir, acquired 58 percent of Polly Peck for £270,000 in early 1980. Nadir became chief executive on 7 July 1980, and the company immediately sought additional capital through a £1.5 million rights issue. Nadir’s strategy was to use Polly Peck as a platform for international acquisitions. In 1982 the group established or acquired businesses connected with packaging, tourism and trade in Turkey and Northern Cyprus. Uni-Pac was developed as a corrugated-box and packaging business, while Voyager Kibris was associated with hotel acquisitions and resort development. Polly Peck also became involved with Cornell, a textile trader, and helped finance the Niksar mineral-water bottling operation in Turkey. Niksar later developed substantial sales in Middle Eastern markets. The group continued to build a broad textile and manufacturing network. In 1983 it acquired a majority interest in Santana in the United States and InterCity in the United Kingdom. Further purchases and share increases extended its presence into the Far East, including Impact Textile Group and Shuihing. In 1987 Polly Peck took a majority interest in Palmon in the United Arab Emirates. These transactions transformed the company from a British fashion business into a multinational textile and consumer-products group. A particularly important stage of diversification began in 1984, when Polly Peck acquired 82 percent of Vestel Electronics in Turkey. Vestel produced colour televisions, video recorders, air-conditioning systems, audio equipment, microwave ovens and washing machines. Licensing relationships with companies including Akai, Ferguson, Salora and GoldStar supported the electronics operation. Polly Peck later acquired Russell Hobbs, adding a recognised household-appliance business to its portfolio. In 1989 the group acquired a 51 percent stake in Sansui, making Polly Peck one of the first foreign companies to acquire a major Japanese company listed on the Tokyo Stock Exchange. In the same year it purchased the former Del Monte fresh-fruit division from RJR Nabisco for $875 million. Polly Peck was admitted to the FTSE 100 Index in 1989. At its height, the group had a reported market capitalisation of approximately £1.7 billion, more than 200 direct and indirect subsidiaries, 17,227 employees, reported pre-tax profits of £161.4 million and reported net assets of £845 million. The group’s rapid growth concealed increasingly serious financial and governance problems. In 1988, 24 payments totalling £58 million were made to subsidiaries in Turkey and Northern Cyprus. In 1989, a further 64 transactions transferred £141 million. Regulators later examined payments involving the nominee company Fax Investments and assets in Northern Cyprus that were registered in Nadir’s name or had no clearly recorded owner. The movement of funds, the group’s complex structure and the concentration of authority in the chief executive created severe weaknesses in oversight. In August 1990 Nadir announced that he intended to take Polly Peck private, then withdrew the proposal later that month. On 20 September 1990 the Serious Fraud Office raided South Audley Management, which controlled Nadir family interests. Polly Peck’s share trading was suspended that day. The company had more than £100 million in short-term revolving credit facilities and additional long-term borrowing secured against its shares. In October, the High Court granted a provisional liquidation application brought by the London branch of the National Bank of Canada. Polly Peck’s directors then undertook steps leading to voluntary administration. Polly Peck collapsed in 1991 with debts reported at approximately £1.3 billion. The failure became a landmark British corporate scandal and helped drive reforms in company law, audit practice and board accountability that contributed to the early development of the UK Corporate Governance Code. The group’s Vestel interest was transferred in 1991 to Collar Holding BV in the Netherlands. In November 1994, Ahmet Nazif Zorlu acquired Polly Peck from the administrator through the purchase of Collar Holding, creating the corporate route by which Vestel passed out of the failed group. Nadir remained outside Britain for years after travelling to Northern Cyprus in 1993. He returned on 26 August 2010 under strict bail conditions and faced trial on specimen charges drawn from a much larger allegation of theft and false accounting. In August 2012 he was convicted on ten counts involving nearly £29 million and sentenced to ten years’ imprisonment. The original Polly Peck group is defunct, although some businesses associated with its former portfolio continued under subsequent ownership.

• 2012

  Nadir sentenced

  [1]Polly Pecken.wikipedia.org

  Asil Nadir is convicted on ten theft counts and sentenced to ten years in prison.

• 1994

  Vestel interest leaves the failed group

  [1]Polly Pecken.wikipedia.org

  Ahmet Nazif Zorlu acquires Polly Peck from the administrator through Collar Holding BV.

• 1991

  Group collapses

  [1]Polly Pecken.wikipedia.org

  Polly Peck enters administration after a collapse involving approximately £1.3 billion in reported debts.

• 1990

  Investigation and trading suspension

  [1]Polly Pecken.wikipedia.org

  The Serious Fraud Office raids South Audley Management and trading in Polly Peck shares is suspended.

• 1989

  Peak diversification and FTSE 100 admission

  [1]Polly Pecken.wikipedia.org

  The group acquires a controlling interest in Sansui, buys the former Del Monte fresh-fruit division and joins the FTSE 100 Index.

• 1984

  Vestel Electronics acquired

  [1]Polly Pecken.wikipedia.org

  Polly Peck acquires 82 percent of Turkish electronics manufacturer Vestel.

• 1980

  Asil Nadir gains control

  [1]Polly Pecken.wikipedia.org

  Restro Investments acquires 58 percent of Polly Peck, Nadir becomes chief executive, and the company launches a rights issue to fund expansion.

• 1940

  Polly Peck is founded

  [1]Polly Pecken.wikipedia.org

  Raymond and Sybil Zelker establish a small British fashion house.

Polly Peck was positioned less as a focused consumer brand than as a rapidly expanding, acquisition-driven international holding company. Under Asil Nadir, it presented itself as a diversified growth group with interests spanning manufacturing, consumer goods, hospitality, food and textiles.

• Apparel and textiles · 1940

  Fashion and textiles

  The original Polly Peck business was a British fashion house. During the 1980s, the group expanded its textile interests through stakes in companies including Santana, InterCity, Impact Textile Group, Shuihing and Palmon. These operations gave the group production, trading and distribution exposure across Britain, the United States, the Far East and the United Arab Emirates.

• Consumer electronics and appliances · 1984

  Vestel Electronics

  Acquired by Polly Peck in 1984, Vestel was a major Turkish electronics manufacturer producing colour televisions, video recorders, air-conditioning units, audio equipment, microwave ovens and washing machines. Its licensing relationships with international electronics companies helped broaden its product range and contributed substantially to Polly Peck’s industrial diversification.

• Bottled beverages · 1983

  Niksar mineral water

  The Niksar operation was established in Turkey using capital raised through Cornell and Polly Peck. It bottled mineral water for regional and export markets and was reported to have sold approximately 100 million bottles to customers in the Middle East.

• Fresh food · 1989

  Del Monte fresh-fruit division

  In 1989 Polly Peck acquired the former Del Monte fresh-fruit division from RJR Nabisco. The transaction represented the group’s expansion beyond textiles and manufactured goods into large-scale international food production and distribution.

• Household appliances

  Russell Hobbs

  Russell Hobbs was acquired as part of Polly Peck’s consumer-products diversification. The housewares business complemented Vestel’s electronics portfolio and extended the group’s exposure to branded household appliances.

• 2012

  Asil Nadir theft conviction

  Nadir was found guilty on ten counts of theft involving nearly £29 million from Polly Peck and was sentenced to ten years in prison. He had denied the allegations.

  Source

• 2002

  Audit disciplinary proceedings

  The Joint Disciplinary Tribunal fined Stoy Hayward £75,000 for its role as Polly Peck’s group auditor. A second accounting firm was also sanctioned in relation to audits of Northern Cypriot subsidiaries.

  Source

• 1993

  Asil Nadir’s departure from Britain

  Nadir left the United Kingdom after his bail lapsed and remained in Northern Cyprus for many years while facing allegations connected with Polly Peck.

  Source

• 1990

  Polly Peck financial collapse and suspected fund transfers

  Regulators and investigators examined large transfers from Polly Peck businesses to subsidiaries and related entities in Turkey and Northern Cyprus. The group’s complex structure, weak challenge to executive authority and unclear ownership of certain assets were central issues in the company’s collapse.

  Source

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• 1990

  Propose and withdraw a take-private transactionStrategy

  Background

  Nadir believed Polly Peck was undervalued by the public market.

  Action taken

  He announced in August that he intended to take the company private, then reversed the decision later in the same month.

  Aftermath

  The reversal occurred shortly before the Serious Fraud Office investigation, share-trading suspension and administration proceedings.

  Source

• 1989

  Expand into Sansui and fresh fruitM&A

  Background

  At the height of its acquisition programme, Polly Peck sought further scale in consumer electronics and food distribution.

  Action taken

  Polly Peck acquired a 51 percent stake in Sansui and purchased the former Del Monte fresh-fruit division from RJR Nabisco.

  Aftermath

  The transactions increased the group’s international profile but added substantial operational and financial complexity shortly before its collapse.

  Purchase price for former Del Monte fresh-fruit division. $875 million (1989)

  Source

• 1984

  Acquire a controlling stake in Vestel ElectronicsM&A

  Background

  Polly Peck was broadening beyond textiles and seeking industrial businesses with international growth potential.

  Action taken

  The group acquired 82 percent of Vestel Electronics in Turkey.

  Aftermath

  Vestel became one of Polly Peck’s most important operating assets and later passed to Ahmet Nazif Zorlu after the group’s collapse.

  Source

• 1980

  Adopt an acquisition-led international growth strategyStrategy

  Background

  After taking control of the struggling fashion company, Asil Nadir sought to use Polly Peck as a platform for overseas investment and diversification.

  Action taken

  The company raised new capital and pursued acquisitions and investments in packaging, tourism, textiles, electronics, food and household products.

  Aftermath

  The strategy produced exceptional growth and FTSE 100 membership, but also created a highly complex group with significant borrowing and governance risks.

  Source

1. 1Polly Pecken.wikipedia.org