Introduction of PPI

• Former type Public• Industry Electronics• Fate Bankrupt & broken up• Founded 1940• Defunct Bankrupt 1990• Headquarters London, UK• Key people Asil Nadir, (CEO)• Employees 17,000

Introduction PPI

• Polly Peck International (PPI) was a small and barely profitable United Kingdom textile company.

• It expanded rapidly in the 1980s and became a constituent of the FTSE 100

• It collapsed in 1990 with the colossal debts of £1.3bn

History of PPI

• The company was founded by Raymond Zelker and his wife Sybil in 1940 as small fashion house operating in London.

• Early in 1980 Restro Investments, a company controlled by Asil Nadir, a Turkish Cypriot, bought 58% shares of the company for £270,000.

• On 8 July 1980 Polly Peck launched a rights issue to raise £1.5m of new capital for investments

Ventures

Uni-Pac Packaging Industries LtdUni-Pac was a grooved box manufacturer and packaging company formed to take advantage of surplus citrus fruit being grown in Cyprus, which was forecast to produce a minimum of £2.1 million profit.

Voyager Kibris LtdVoyager Kibris Ltd was used to purchase the Sheraton Voyager Hotel in Turkey and to build resort hotels in Northern Cyprus.

Major Acquisitions

• In September 1982 Nadir acquired a major stake of 57% in a textile trader, Cornell, whose shares were considered penny shares.

• In 1983, Nadir also began expanding PPI's textile business by purchasing a 76 percent stake in Santana Inc. in the United States.

• In 1987 PPI acquired a majority interest in Palmon (UAE) Ltd., a manufacturer of casual shirts.

• In April 1984, PPI also diversified into the electronics business by acquiring 82 percent ownership of Vestel Electronics, one of the largest publicly traded companies in Turkey.

• By 1989 Polly Peck had become an international player by acquiring a 51% majority stake in Sansui (a Japanese electronics company on hard times).

• In1989, Polly Peck bought the former Del Monte fresh fruit division for $875 million from RJR Nabisco.

Achievements

• Market capitalization went from only £300,000 to £1.7 billion at its peak.

• It became a holding company for a world wide group of over 200 direct and indirect subsidiary companies.

• It earned pre-tax profits of £161.4 million.• Total net assets of £845 million.• The Polly Peck group was one of Britain's top

one hundred quoted companies.

What went wrong?

Attempt to take the company privateIn August 1990 Nadir came to the view that the company was undervalued and then announced that he was taking it private.

ButAlmost as suddenly later that month he announced that he had changed his mind.

Down fall of PPI

• Accountants' Joint Disciplinary found that during 1988 Polly Peck made 24 separate payments to its subsidiaries in Turkey and northern Cyprus, totaling some £58m.

• Next year PPI paid £141 m in 64 deals with the decisions made by CEO (Nadir)

• In 1990, Polly Peck's board became so worried about the money transferred into Northern Cyprus that it confronted Mr Nadir and asked him to return it. He refused.

• The accounting regulators found that the Inland Revenue had been investigating transactions by a Swiss nominee company, Fax Investments, in shares in Polly Peck and another company run by Mr Nadir's son, Birol.

• On top of these massive money transfers and "unwise transactions", the regulators found that some of Polly Peck's assets had been secretly registered in Mr Nadir's name.

• These were all in Northern Cyprus and had a net book value of £25.5m in 1989.

• In addition the Didima Hotel development in Northern Cyprus, valued at £15.5m, and £6.7m worth of other buildings, had no registered owner. Nadir said he was holding the assets "on trust" for Polly Peck businesses.

• On 20 September 1990, the Serious Fraud Office (SFO) raided South Audley Management

• The raid triggered a run on Polly Peck shares with the price practically in free fall.

• Trading in the company’s shares was suspended on 20 September 1990.

• At end of October 1990 an ex-parte application for Provisional Liquidation was granted at the High Court in London.

• The Directors of Polly Peck met at their London HQ and undertook a course of action leading to Voluntary Administration.

Consequences of collapse

• Charges were brought against Asil Nadir for 70 charges of false accounting and the theft.

• In 1991, Polly Peck Group transferred all of its Vestel Electronics shares to one of its subsidiaries, Collar Holding BV.

• In November 1994, Ahmet Nazif Zorlu acquired PPI from the administrator by buying the entire share capital of Collar Holding BV, which at the time held 82% of the Polly Peck's issued share capital.

Leaving the UK and returning

• Nadir left the UK just after his £3.5 million bail had lapsed.• He left on a light aircraft to France, where he flew on to Turkish

Cyprus, which has no extradition agreement with Britain and until 26 August 2010 he remained a fugitive in northern Cyprus, which is only recognized by Turkey.

• On 29 July 2010 Asil Nadir began legal proceedings to be granted bail in the UK, allowing him to return.

• he returned to the UK on 26 August 2010.• On Friday 3rd September 2010, Asil Nadir was put under a

midnight to 6am curfew, an electronic tag and has been made to surrender his passport. His trial started on 23rd January 2012.

Questions