When Lucian Freud's Benefits Supervisor Sleeping a portrait of a 20-stone naked woman sprawled across a sofa was sold to Roman Abramovich for $34m in May, it became the most expensive work ever sold by a living artist. It was also the first sign that a £2bn empire was about to unravel, says The Sunday Times. The sale was a desperate attempt by French financier Guy Naggar to raise cash to shore up his property-to-financial-services group, Dawnay Day. It was too little too late. "An insatiable appetite for growth" had taken Naggar and partner Peter Klimt "one step too far". Within weeks, great chunks of their enterprise had collapsed.
Dawnay Day has been seen as the latest victim of the credit crunch, says the Daily Mail. But its owners' ambition was as much to blame for the conglomerate's woes. Guy Naggar had "a lust for empire that would have made even Napoleon blush". Dawnay Day has a rich history (see below). But by the time Naggar bought it for £3m from the Rothschilds in 1981, it was little more than a cash shell. "Naggar wheeled and dealed his way through the loadsamoney 1980s," bringing Klimt, a Mumbai-born lawyer who specialised in tax, on board in 1992. Naggar's aim was to find "hidden value" in unfashionable property assets. "The second building we ever bought was the Iceland on Brixton Road, not long after the riots," he told an interviewer in 2004. It was the start of a debt-fuelled acquisition spree leading to holdings and cross-holdings in at least 250 firms across Europe.
Naggar, 67, was born in Cannes and studied engineering at the Ecole Centrale, Paris. He trained as a merchant banker before moving to London in his 20s and becoming deputy chairman of Charterhouse Bank.
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Klimt, also a trained engineer, shared his partner's love of art. Dawnay Day's offices in Grosvenor Gardens "more closely resembled a private art gallery than a company HQ", says The Sunday Times. The unconventional collection, which included "a Tracey Emin wheelbarrow filled with rubbish and barbed wire", mirrored the aggressive style with which Naggar built his firm. At its peak, says The Sunday Telegraph, Dawnay Day was the "largest player in Aim-listed property management", with three listed vehicles, Carpathian, Sirius and Treveria, focused on German and Eastern European commercial property.
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Under Klimt's guidance, the group also moved into financial services, ranging from stock and commodity brokerages, through a unit specialising in Islamic finance, to a wealth management business in India. Much of the empire was amassed out of the public gaze. But recent trophy asset purchases including London restaurant The Wolseley put them in the limelight. By the start of the year, their "magpie collection" included Austin Reed, a property venture in Harlem, and interests in the sci-fi film, Sleep Dealer. Dawnay Day "seemingly had a finger in everything".
"There are two guiding principles we've had all the way through," Naggar said last year. "One is back talent. Two is buy hard assets with deep value. We also like to have our own money in funds. We like to feel we're at risk." Following the swift collapse of his empire, says The Times, "these comments may have come back to haunt him".
Dawnay Day: an amazing past and a grim future
Dawnay Day was founded by Major Julian Day and General Guy Dawnay in 1928. The latter was the commanding officer of Lawrence of Arabia, and reputedly inspired Lawrence's remark that "A Dawnay is worth a thousand camels". The group provided finance for growing businesses (it helped bring Marks & Spencer to market) and spent a decade in the Rothschild empire before being bought by Naggar. While there seemed "no particular philosophy" behind the group's purchases, Naggar and Klimt had a reputation for caution. One property expert told The Sunday Telegraph, "what is happening has amazed the market".
Yet, with hindsight, Dawnay Day was an accident waiting to happen, says Claer Barrett in Investors Chronicle. "The basic modus operandi was driving debt to the maximum level on virtually everything they bought." Naggar boasted that because Dawnay Day was privately held they could "make decisions very quickly", says The Sunday Times. But the upshot was a web of subsidiaries connected by intercompany loans and cross-shareholdings, owned by the firm or Naggar and Klimt. This created a "toxic mix" when the property market collapsed.
The implosion began when Dawnay Day creditor, Landsbanki, issued a margin call, forcing the group to sell a 20% stake in F&C Asset Management at an £80m loss. When fellow creditor Norwich Union followed suit, the game was up. Much of the firm is now in the hands of administrators and the future for Naggar and Klimt looks "grim".
