Sir David Murray to sell core business as debts take toll

SIR David Murray has put a “for sale” sign on the core part of his business that helped make his fortune, as the burden of debt continues to weigh heavily on his multi-million-pound firm.

The former chairman of Rangers FC has confirmed his struggling metals business – a sector he has been involved in for 37 years and which accounts for about half his company’s income – is being put up for sale “in whole or in parts”.

The sale was revealed in the accounts of Murray International Holdings (MIH) and confirmed by Graeme Hill, managing director of Murray Metals Holdings. He said the firm was seeking a buyer for its general steels business to focus instead on its “speciality metals and plate businesses”.

The development is expected to generate uncertainty among Sir David’s hundreds of employees, including those at Forth Steel at South Gyle in Edinburgh.

The firm declined to identify which businesses would be put up for sale but singled out its Newton Steel Stock subsidiary, which has sites at Henstridge in Somerset and Ferndown in Dorset.

The publication of last year’s accounts marks the end of a difficult year for Sir David, who was forced to sell Rangers after owning the club for 23 years. For the past 18 months, the tycoon has been desperately trying to reduce his company’s pile of debt through a dramatic process of restructuring of his business interests.

The MIH metals division brought in more than half the money made by Sir David’s dwindling empire last year. MIH also has interests in property, through its Premier Property Group (PPG) division, while Sir David owns a call-centre business, Response, and a housing development firm, Murray Estates, that owns 600 acres in the west of Edinburgh.

Privately, there is the family investments division, run by his son David, as well as wineries in Burgundy in France.

Sources close to Sir David, 60, assured The Scotsman the family was “not on the breadline”.

But it was in metals trading that Sir David got his start at the age of 23, when he set up an office in Edinburgh’s Alva Street. Now the metals division spans trading desks, warehouses and fabrication yards across the UK, Ireland and Singapore.

But Sir David, once feted as one of Scotland’s richest men, with a personal fortune estimated at more than £700 million, has seen his business empire hit hard by the global financial crisis. At its peak, MIH brought in revenues of close to £400m and profits of £40m.

But this still fell short of Sir David’s ultimate ambition. In 2006, when his business was growing and banker HBOS’s head of corporate banking, Peter Cummings, was still freely lending money, he told one reporter he had ambitions of breaking the billion-pound barrier. “We’ve grown from £120m to £550m in five years, so why not? We have the people to do it,” he boasted.

What he didn’t account for was the drastic change in HBOS’s fortunes, when it would have failed if it hadn’t been taken over by Lloyds Banking Group.

MIH’s debt peaked at £759m. After a year of negotiations, Sir David agreed a deal with Lloyds in 2010, which cut the debt – and the share of the business owned by him and his family to 70 per cent.

Last week, it was revealed he had taken a £59m write-down on the sale of Rangers – he sold to Craig Whyte before the club was put into administration.

Sir David said he had done yet another deal with Lloyds, this time for £117m – although he did not disclose how much of MIH equity the bank now owns.

According to figures seen at Companies House, MIH made an overall loss of £86.9m in the year to the end of 30 June, 2011. It also emerged the firm had taken a “strategic decision” to sell the metals division, although when the statement was written, “the outcome of that process has not been determined”.

Already PPG, which own’s Princes Mall near Waverley station in Edinburgh, has started selling properties to reduce its debt, although, given the current market, trade has been slow.

In a gloomy statement giving an insight into Sir David’s outlook for MIH, he noted his “profound regret” about the botched sale of Rangers. He also wrote that the metals business was selling 45 per cent less than at its peak. This was despite inflation pushing up prices, which brought in an extra £30m of revenues into the metals division to £202.2m. But it wasn’t enough. The firm also knocked £13.6m off the value of the business.

One commentator said of the Murray metals business that “it has been knackered for years”, adding: “What’s it worth and who would want it?”

Mr Hill said business had been hit by recession and its effect on the construction industry.

He said: “We need – as have our peers and competitors – to further reduce reliance on the UK construction market, which has been hit hard by the economic recession over the past three years. All of the indications are that an upturn in UK construction is not on the horizon and that demand for related products in a highly competitive market will remain flat.

“It is clear that to remain in this market would require more investment and development and, as it is not longer a strategic core sector, we have decided to withdraw from particular general steel products.”