Maxwell, Britain’s Controversial Media Magnate, Arrives on U.S. Scene

Ian Robert Maxwell must be feeling pretty good these days.

The larger-than-life media magnate had lost several battles to take over American publishing companies before he was able to capture the nation’s third-largest textbook publisher, Macmillan Inc., for $2.6 billion early this month.

The Czech-British publisher had to sue, and a court had to agree that Macmillan had favored his opponent in the bidding process. But Maxwell won, and the acquisition is sweet vindication for the 65-year-old press baron who has been repulsed again and again by American publishers ranging from Scientific American magazine to Harcourt Brace Jovanovich Inc. to the New York Post.

Then, in just one week, Maxwell became a significant presence in the American publishing world. Five days before his Macmillan coup, Maxwell announced that he was buying the Official Airlines Guide, a Dun & Bradstreet subsidiary that publishes flight guides and travel magazines, for $750 million.

The acquisitions move Maxwell closer to his avowed goal of making his Maxwell Communication Corp. one of the world’s top 10 media companies by 1990, with revenue of more than $5 billion. Without his latest deals, it would be difficult to achieve that goal. Last year, MCC reported profits of $244 million on revenue of $1.61 billion.

MCC publishes newspapers, books and magazines, operates television stations and cable programs, as well as manufactures compact discs. The company has offices in 26 countries and operates joint printing, publishing and television ventures in Kenya, Portugal, France, Japan, Spain and Bulgaria. Maxwell employs 5,400 people in this country, printing newspaper inserts and magazines such as Parade, TV Guide, Time and Sports Illustrated. But above all, MCC has flourished as a printing operation, the largest in Europe and second only to R. R. Donnelley & Sons in the United States.

Bitter Takeover Fight

That may change soon. Just hours after acquiring Macmillan, Maxwell announced that he would be selling off his British printing operations, which are worth hundreds of millions of dollars, saying the sales represented “a major strategic refocusing” out of printing and into publishing. The sales also clearly will help to cover the cost of purchasing Macmillan.

Last year, Harcourt Brace Jovanovich chose to undergo a costly recapitalization plan, more than tripling its debt, rather than be absorbed into the Maxwell empire. In the heat of the acrimonious battle, HBJ Chairman William Jovanovich declared Maxwell “entirely unfit to control the biggest textbook, scientific and medical publishers in the United States. Mr. Maxwell has money, but not enough. He has ambition, but not enough. He ought to be sent packing to Liechtenstein,” where the trust that controls his company holdings is based.

Maxwell, who was not available to be interviewed for this article, issued a statement during the HBJ discussions saying he was disappointed that “Mr. Jovanovich has limited his comments to personal abuse of me.”

But Maxwell has often been met with such a reception in America. Typical of the welcome he has received is one from Rep. Andy Ireland, Republican congressman for the Florida district that included Orlando, where HBJ is headquartered.

“I have serious questions and reservations as to the background of Robert Maxwell, his firm and his intentions regarding the future operation of HBJ,” Ireland stated, demanding that the Federal Trade Commission investigate Maxwell’s business practices. “He makes a practice of keeping his activities a well-kept secret and beyond the scrutiny of public opinion.”

Scientific American’s proprietors were equally hostile when Maxwell tried to purchase the magazine in the summer of 1986. The magazine’s board agreed to accept a lower bid of $52.6 million, rather than be bought by Maxwell for $61 million. Maxwell said his bid was opposed because he planned to oust management, but Gerard Piel, chairman of Scientific American during the auction, offered a different explanation.

Accused of Bluffing

“We figured his money didn’t have the right color,” Piel said in a telephone interview. “I have a feeling about him that he gets into these bidding matches for the publicity and the money isn’t really there.”

Piel raised the issue of the ownership of Maxwell’s companies and referred to his controversial past business dealings. He also said Maxwell was offered the chance to appeal directly to the shareholders but didn’t, which confirmed Piel’s feeling that Maxwell was bluffing and didn’t really have the cash.

“The wariness was based on the guy’s past record, and we didn’t think he was offering real money,” Piel said.

What is behind the distrust that American companies apparently have for this man who is widely credited with having turned around the British printing industry and made it profitable in a very short time?

One of the major problems is that Maxwell hasn’t been able to overcome a 20-year-old financial scandal in which British government investigators accused him of inflating earnings and condemned him as unfit to run a public company. In January, 1969, Saul P. Steinberg, a New York financier and then chairman of Leasco Data Processing Co., offered to merge Maxwell’s scientific publishing operations, Pergamon Press, with Leasco, leaving Maxwell president of Leasco’s operations in Europe after the deal was consummated.

After taking over the company, however, Steinberg charged that Maxwell had misrepresented Pergamon’s financial situation. Maxwell and eight other directors were ousted from the board and replaced by Steinberg’s people. Britain’s Department of Trade and Industry investigated Maxwell’s business practices and determined that he had set up a complex web of transactions between Pergamon and Maxwell’s private companies, which he used to inflate Pergamon’s stock price.

Ownership Cloudy

“Notwithstanding Mr. Maxwell’s acknowledged abilities, he is not, in our opinion, a person who can be relied on to exercise proper stewardship of a publicly quoted company,” the report concluded in 1971.

Another factor contributing to the wariness that people feel about Maxwell is the mystery surrounding the ultimate ownership of his holdings. The controlling stake in Maxwell’s public and private companies is a trust based in the tax haven of Liechtenstein called the Maxwell Foundation. The trust was originally set up in 1970 to protect the Maxwell family from Steinberg’s lawyers seeking damages in a $22-million lawsuit that Maxwell eventually settled in 1974.

Today the foundation owns and controls the Pergamon-Maxwell companies, and the foundation’s annual income is currently estimated to be more than 25 million British pounds. Maxwell refuses to disclose details about the foundation, although he has said that when he dies, his seven children will not inherit his wealth, but the money will be distributed among five charities.

Then there is the question of his personality and management style. Those who have dealt with him call him “flamboyant, mercurial, autocratic, impatient,” among other descriptions.

“Maxwell is a very forceful person,” said Derek Terrington, a publishing analyst at UBS-Phillips & Drew, a securities firm in London. “The same characteristics that give him his single-minded attitude--enormous energy and drive--also probably underlie his weaknesses: He never listens to advice and thinks he can do things that he can’t or doesn’t understand, like the publishing industry.”

“He’s known as a guy who makes snap decisions, one who is very theatrical in business postures,” said Bert L. Boksen, chief investment officer for Raymond James Financial Inc. in St. Petersburg, Fla. “Managements fear that he will run their companies a different way than they would run them, so very few want to work for him.”

Boksen also noted that Maxwell’s “political persuasion”--he is a self-proclaimed socialist--may rub many Americans the wrong way.

An Empty Ambition

Analysts cite Maxwell’s ambitious revenue goal for 1990 as an example of his flamboyance and question whether the end will justify the means.

“The 3 to 5 billion pounds target is an empty ambition anyway. Nobody is really interested in being big for big’s sake,” said Angela Bawtree, a publishing analyst with Warburg Securities in London. “Perhaps it was unwise to give himself that target. Now there is pressure to get there at all costs. He may well get there, but the question is how?”

Analysts also note that a major reason why corporate managers hesitate to sell their businesses to Maxwell is because they are not convinced that he has a plan for how to manage the companies he wants to take over. They don’t believe he is really interested in operating their businesses, just in acquiring them.

When companies are being romanced in a merger, their executives are looking to see whether their suitor “is a good company, whether it has a coherent strategy, a track record of success and the managerial capacity to carry goals through,” Terrington observed.

“He hires a lot of talented, high-powered people, but Maxwell runs everything,” said Frank Barlow, chief executive of the Financial Times in London. “He’s a one-man band. There is no question that no one makes real decisions in Maxwell’s organization except Robert Maxwell.”

Even Maxwell’s children don’t escape his iron-fisted rule. Maxwell reportedly once fired his son for failing to keep a business appointment, although he hired him back two years later.

By all accounts, Maxwell is a man of extraordinary energy, keen intelligence and resourcefulness. He is fluent in nine languages, including Russian, German and Hungarian. Maxwell is a big man, standing over 6 feet tall and weighing 250 pounds. He works seven days a week, often as many as 17 hours a day.

Hectic Schedule

He has been known to conduct several mealtime meetings simultaneously in adjoining dining rooms at Headington Hill Hall, an 11-acre mansion that he rents from the Oxford City Council. Moving from room to room, he will eat the first course at one table and additional courses with different company, all the while conducting business.

On the road, a bevy of aides trail in his wake, ready with portable fax machines and telephones to fulfill his commands. Maxwell has trouble keeping to a schedule and consequently is late for most appointments. He bought a private plane not for its luxury but because it liberated him from “tyranny” of airline timetables, according to his official biographer, Joe Haines.

“Unpredictability is the only thing which is certain about him,” Haines observes in “Maxwell,” the only authorized biography of the three that have been written about him. “He enjoys provoking waves and then calming them. He deliberately creates storms and then quiets them. He pours oil on troubled waters which were smooth before he arrived.”

Maxwell started his life in inauspicious surroundings, yet with only three years of formal education in primary school, he made a small fortune with Pergamon Press in the 1950s and 1960s. Today, Maxwell’s estimated wealth is 700 million British pounds, and he is unofficially ranked the eighth-richest man in Britain, according to Money magazine.

Born in a small town in Czechoslovakia in 1923, Maxwell was the third of seven children in an orthodox Jewish family of modest means. At the age of 16, Maxwell walked 275 miles to Budapest, trying his hand along the way as a trinket salesman. Fleeing the Nazis, who took the lives of his parents, three siblings and grandfather, he eventually made his way to Britain, where he joined the British Army and changed his name.

After the war, Maxwell made a deal with a German scientific publishing house to export its back and current issues around the world. Maxwell borrowed money from his wife’s family and banks to buy several German academic journals in 1949 and moved the operation to London under the name of Pergamon Press. In 1964, he was elected to Parliament as a Labor Party member.

After the Steinberg debacle in 1971, Maxwell was publicly disgraced, although the British government took no formal action against him beyond issuing a critical report. Many of his detractors thought he was through. However, Maxwell fought his way back into Pergamon and was reelected a company director in 1973. A year later, he bought back the company, offering 1.5 million British pounds for the company, for which Steinberg had paid 25 million British pounds in 1969.

Rebuilt Company

By 1974, Maxwell and his family were heavily in debt from the buyback of Pergamon. He spent the next six years rebuilding the company and in 1980 bought 29.5% of British Printing Co., which was operating at 40% of capacity despite being the largest printing operation in Britain. Maxwell is credited with saving the British printing industry from trade union restrictions and under-investment.

“The British Printing Co. was in a vicious circle,” said Tony Pennie, publishing and paper analyst for James Capel & Co., a securities firm in London. “It was not profitable, but managers were afraid that if they didn’t give in to the union demands and printing stopped, it would not be able to finance bank charges.”

Despite his socialist leanings, Maxwell went to war with the unions, paring British Printing’s labor force to 7,000 workers from 13,000 and renegotiating longer-term bank loans. By the summer of 1984, pretax profit for the company, now called British Printing & Communication Corp., was up 78%.

“Maxwell deserves credit for the first breakthrough on Fleet Street over traditional union power,” Barlow of the Financial Times said. “His was the biggest single achievement in Fleet Street industrial relations in 25 years.”

Not surprisingly, union officials do not have much regard for Maxwell’s tactics.

Not Union Busting

“Bob Maxwell would charm the birds off the trees and then shoot them,” said Bill Keys in 1982, when he was general secretary of the Society of Graphical & Allied Trades (SOGAT), a union of printers, paper makers and book binders in Britain.

Of Maxwell’s challenge to the unions, one current senior SOGAT official, preferring to remain anonymous, said in a telephone interview: “It wasn’t union busting, it was murder.”

After wanting to acquire a newspaper company for nearly 15 years, Maxwell finally bought the Mirror Group Newspapers from Reed International on July 12, 1984, for $191 million, acquiring Britain’s second-largest newspaper, the Daily Mirror.

“Maxwell was a penniless peasant boy in a war,” Barlow said. “He’s gone from that to his achievements today. Whether people love him or loathe him, his achievements can’t be taken away from him. These larger-than-life ruthless tycoons always attract wariness.”