HOW DID BRITAIN’S RICHEST MAN ACCUMULATE HIS $14.5bn FORTUNE?
▶ As Jim Ratcliffe prepares to up sticks and move to Monaco, we look at how he built his chemicals empire
For someone who shuns the spotlight, chemicals billionaire Jim Ratcliffe has been in the news rather a lot lately. Crowned Britain’s richest person by The Sunday Times in May and knighted by Queen Elizabeth II in June, he is now poised to quit the UK to live in Monaco – sparking a fair bit of criticism given his support for Brexit.
This straight-talking runner, mountaineer and adventurer certainly likes to stay busy. He is also developing a successor to the Land Rover Defender, a favourite of Britain’s moneyed rural classes, and merrily snapping up trophy assets such as the fashionable motorcycle jacket maker Belstaff, a Swiss football club and a safari park. There have been reports that he would like to buy English Premier League Chelsea Football Club from Roman Abramovich.
Mr Ratcliffe, 65, can no doubt afford it. His globe-spanning chemicals empire Ineos generated $6.6 billion of earnings before interest, tax, depreciation and amortisation last year on sales of about $60bn, thanks to buoyant demand and ruthless cost control.
He is worth about $14.5bn, according to the Bloomberg Billionaires Index, based on his 60 per cent or so equity interest in Ineos and a couple of mega-yachts. That is maybe a conservative calculation.
He is a complicated character, though, and his Anglo-Swiss company is pretty opaque. Still, if you’re wondering what it takes to become Britain’s richest person, here is how he did it.
Don’t worry about being a late starter
Mr Ratcliffe, who studied chemical engineering and worked later in venture capital, only started as an entrepreneur in 1992, aged 40, and founded Ineos just 20 years ago. It expanded quickly by buying unfashionable petrochemical assets cast off by big oil and chemicals groups.
By slashing fixed costs, he soon had most of them generating lots of cash, allowing him to refinance loans. His trusted equity partners Andy Currie and John Reece each own almost one fifth of Ineos.
Make friends with debt but don’t fall in love with it
One of Mr Ratcliffe’s big talents is persuading banks to lend him vast amounts of money against Ineos’s assets to use for more deals.
Most important was the $9bn purchase of BP’s Innovene petrochemicals business in 2005, which made Ineos a big player in the industry. But the financial crisis showed how risky that borrowing can be.
Demand for chemicals crashed in 2008, Ineos tripped a debt covenant and its bonds crashed to about 10 cents on the dollar. Ineos lived to fight another day, but Mr Ratcliffe still resents the extra fees he had to pay to lenders. He seems to have learnt his lesson. Net debt at the core group was more than $8bn in 2009, or seven times Ebitda, according to Bloomberg data, but that fell to below two times at the end of last year.
It has been able to pay out about €500 million (Dh2.07bn) in dividends during the past two years. No wonder Mr Ratcliffe has been on a shopping spree.
Never sell equity and definitely don’t go public
Mr Ratcliffe once ran a public company (Inspec, which he sold in 1998) but seems to have no intention of doing so again. Public markets, he reckons, are too short-termist and do not value cyclical and commodity chemicals properly. Selling equity is dumb if you don’t have to. “Once it’s gone you never get it back,” he says. Elon Musk would doubtless agree.
Like the embattled Tesla chief, Mr Ratcliffe is dismissive of 20-something equity analysts andquite averse to non-executive directors. Besides the three owners, Ineos has just one other board member. Some credit agencies flag this as a potential problem, alongside related-party transactions involving Ineos.
Keep it tight
Mr Ratcliffe’s Ineos empire is run by a small team of 40 people from a Knightsbridge headquarters in London. Power is devolved to the business units and managers given incentives to boost profits. For an outsider, however, keeping track of all the subsidiary companies is difficult. Ineos has almost 20,000 employees at more than 30 chemicals, oil and gas business units. This makes the finances complicated, something that the trained accountants Mr Ratcliffe and Mr Reece appear to enjoy.
Don’t always be nice
Mr Ratcliffe is a divisive figure, admired for his business nous but disliked by many trade unionists and environmentalists (Ineos wants to frack in the UK). In 2013, Ineos took on
the unions at its loss-making Grangemouth petrochemicals plant in Scotland, threatening to shut it down before eventually forcing through cuts to pension benefits.
Together with new investment and the import of cheap shale ethane feedstock by its supertanker from the US, this seem to have done the trick – at least from a business perspective. The Grangemouth petrochemicals business made €150m of net profit last year, according to a filing.
Be a patriot, unless it costs too much
Mr Ratcliffe clearly likes the UK or he would not keep buying assets there, but it’s a testy relationship. He has justifiably criticised its government for allowing the industrial base to wither and has a soft spot for German engineering – he is developing the Defender there and prefers Germany’s more consensual labour relations.
It is harder to justify his attitude towards tax. In 2010, he uprooted key staff and decamped to a village near Geneva when the UK’s then prime minister Gordon Brown would not let Ineos defer a big sales-tax bill. Mr Ratcliffe returned to the UK in 2016, but is now poised to disappear to Monaco, which also has a favourable tax system.
This also makes you wonder about his support for Brexit. He is not the only wealthy Brexiteer who has explored routes out of Britain for their own money or assets – an option unavailable to most British people if the economy tanks. But Britain’s departure from the EU may yet prove harmful to Mr Ratcliffe’s own financial interests including his nascent car business.
Ineos’s annual report isn’t exactly a glowing endorsement of Brexit, warning that it could “disrupt the free movement of goods, services, capital and people” and “significantly disrupt trade in the UK and the EU markets in which we operate”.
Given his desire for Britain to quit the EU, it seems only fitting that he still has a dog in this fight too.
Whether he watches it from Monaco or anywhere else.