Thursday, October 31, 1996

The crown prince at the House of Rothschild

Anne-Elisabeth Moutet profiles banker David de Rothschild as he moves to take the reins of the family's British merchant bank.

The European, 31 October 1996

Few French banking insiders are surprised by the announcement that David de Rothschild, head of the Paris-based Rothschild & Compagnie Banque, is to be brought even closer to the heart of the London-based N M Rothschild & Sons.

He was appointed by his cousin Sir Evelyn Rothschild as head of the global committee to co-ordinate Rothschild investment banking around the world, confirming him as Sir Evelyn's heir apparent, four years after he had been made deputy chairman of N 11/21 Rothschild.

Under David, 54, son of Baron Guy de Rothschild, head of the French branch of the family, Rothschild & Compagnie Banque had established itself as France's second most active investment bank, behind the legendary Lazard Freres - a respectable result for an operation created from scratch 12 years ago.

When the French Socialists nationalised the old Banque Rothschild in 1982, together with the rest of the French banking system, Baron Guy was outraged to be turned out of the family business - and the legendary building his ancestors had worked from for over a century on Rue Laffitte, employing such bright young men as Georges Pompidou, the former French president.

He was leaving France for good, he vowed in a famous Le Monde article, in which he thundered: "I was a Jew under Petain, now I'm a pariah under Mitterrand. I've had enough!"

Barely two years later, he and his son David were back, using the Ffr400 million ($77m) compensation they had been paid at the time of the nationalisation to set up a small investment bank under the name Paris-Orleans Finance. Two years later, under the first collaboration between then prime minister Jacques Chirac and President Mitterrand, they were allowed to use their own name again, and the name was changed back to Rothschild & Compagnie.

By then it was obvious that the nationalisation had proved a thinly disguised blessing.

Nationalisation compensations had been calculated on the share price over a five-year period, which usually produced much higher valuations that the 1982 bear market price. Rothschilds were rid of an inefficient, overstaffed retail banking network.

By 1987, David de Rothschild was luring to his company such whizzkids as Jean-Charles Naouri, former chief of staff of minister Pierre Beregovoy, and the man widely credited for the Paris Bourse "small bang" and the complete opening up of French financial markets. Naouri almost immediately created his own, Rothschild-backed investment fund, Euris, which is now valued at more than Ffr10bn.

In 1989 David poached Jean-Claude Meyer from Lazards: year and a half later, Meyer closed the Ffr23bn deal in which Philip Morris acquired Jacobs Suchard.

A subsequent uneasy, truce between Lazards & Rothschild was ended in 1994 when the Rothschilds hired Christian de Labriffe, a Lazards partner. In the meantime, Rothschild & Cie had hired Wasserstein-Perella' s international celebrity Yves-André Istel, in 1992, as vice chairman in charge of development of the United States branch, Rothschild Inc; and offered jobs to Gerard Worms, the former chairman of Compagnie de Suez, and to Nicolas Bazire, former chief of staff of Edouard Balladur, who had become prime minister.

For the past six years, the bank has proven one of the main players on the French and international scene. It advised Trust House Forte in its winning bid for Meridien Hotels against Accor, counselled by Lazards. It was the French, government's adviser in the privatisation of Renault and Thomson. It also advised Lyonnaise des Eaux when it acquired Northumbrian Water and sold PFG.

The bank's latest recruits have pulled their weight: Worms was instrumental in the rapprochement between Credit Communal de Belgique, while Bazire oversaw the setting up of a strategic alliance between Compagnie Generale des Eaux and British Telecom.

Rothschild & Cie employs 160 people whereas NM Rothschild's City teams number 600. The group employs 2,200 people worldwide wide. This helps explain the policy for both independent houses to work together "whenever possible".

A degree of specialisation has also taken place: London tends to do telecoms and natural resources, while Paris makes agribusiness and food a speciality. But mostly the French bank, following its London cousin's tradition, has become an expert at privatisations.

Rothschild & Cie's progress comes at a time when its older rival and neighbour Lazard Freres is suffering from transformation pains. Lazard's "elephants", Antoine Bernheim, Bruno Roger and Jean Claude Haas, all pushing 70, are said to be unhappy with the promotion of Michel David-Weill's brash son-in-law, Edouard Stern, 41, as heir-apparent, and with Stern more adventurous strategies. This explains the recent haemorrhage of younger partners.

Younger French Rothschild family members have been painlessly eased into Rothschild & Cie: Edouard de Rothschild, David's half-brother, is a full partner while their stepbrother Philippe de Nicolay works in the asset management department.

Eric de Rothschild, their cousin. son of Baron Guy's late brother Alain, who until now was in charge of the family's Bordeaux wine, Chateau Lafite-Rothschild, has also joined the bank. Although there are so far no expectations of seeing Swiss-based cousin Edmond de Rothschild's Compagnie Financière Edmond de Rothschild join the family group at this stage, Edmond's son Benjamin might come and work for Rothschild & Cie, say bank insiders.

The suicide this summer in Paris of Amschel Rothschild, 41, son of Victor and brother of Jacob, who was in charge of Rothschild Asset Management, rocked the bank. Amschel had just attended a normal working lunch with the Paris asset management team.

That evening he walked back from the bank's Rue Rabelais's offices to his hotel, the Bristol, and hung himself with his bathrobe belt from a towel rack in the bathroom. He had been, friends said later, depressed.

Paris Rothschild sources were quick to dismiss rumours that he had been shattered by the prospect of being elbowed out of Sir Evelyn' s succession by David.

"Amschel just wasn't terribly good at what he did, and he'd known it for years," one source said. "David had been made vice-chairman four years ago. This was no longer an issue."

Certainly David's latest promotion confirms his position as the anointed Rothschild crown prince. "Evelyn is still going strong at 64," insiders protest. "And he has children in their teens. They will inherit ultimately, there's no doubt about that."

But it is the French cousin who may find himself steering the House of Rothschild, more united than at any time for the be part of a century, into the new millennium.

© Anne-Elisabeth Moutet, 1996

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