Keeping it in the family

TRANSITION comes slowly and with a great deal of complexity at Rothschild. With more than 200 years of merchant banking discretion behind it, Rothschild lifts the veil very gingerly.

The purpose of the deal between the British and French arms is to provide a smooth transition within the group by equalising the equity of the two branches.

David de Rothschild, 60, a very distant French cousin of Sir Evelyn de Rothschild, becomes boss of the whole shooting match.

Sir Evelyn, almost 72, remains as a non-executive chairman of NM Rothschild, the investment bank he has ruled for 21 years. This is after the split with his closer cousin Lord Jacob Rothschild, who went on to found his own independent and profitable financial empire.

In an age when enterprises founded less than a decade ago by Russian oligarchs are estimated to be worth several billions, the value being put on Sir Evelyn's interest of at least £400m looks relatively modest. This is especially so when one considers the billions received by the Fleming family from Chase and the Schroder scions when they sold to Citigroup.

But Rothschild remains in for the long game. It continues to play this shrewdly. In recent years, Sir Evelyn removed NM Rothschild from stockbroking when he agreed to the sale of SmithNew Court to Merrill Lynch.

More recently, he disposed of its asset management company. Rothschild has never lost sight of the fact that, at core, it is an advisory business living on its wits.

Both the British and French arms, now coming together in Concordia, have done well against the odds. Over the past six months, Rothschild was the top house for mergers and acquisitions in France and Germany. This is from a standing start, in that it is only a decade since David reclaimed the French bank from nationalisation.

Currently, the group is advising Ahold on its restructuring, and aluminium producer Pechiney on its defence against Canada's Alcan.

Will the deal weaken or strengthen the family hold? It is hard to tell. We know that there are outside investors, including Royal & SunAlliance.

Its holding is a relic of the founding by Rothschild of the Alliance Insurance group in 1824, which historian Niall Ferguson suggests was part of an effort to enfranchise Jewish businesses discriminated against by other insurers.

It might also be possible to buy into the empire through Paris Orleans, in which the family retains a 57.7% holding. It is described as 'a public company through which the French family's interests are held'.

Now there is an exciting prospect for an ambitious global bank wishing to stir things up.

Sterling crossfire
THE speed with which world markets turn about is something to behold. A few months ago, the dollar was dead in the water and the euro was the only game. As for Japan, the yen and the Nikkei, they were the dead parrots of global finance.

Wind the tape forward and what do we find? The Nikkei is retreating from its 13-year lows at a fast pace, briefly topping 10,000 for the first time in almost a year, as Japan reported a strong rise in machinery orders.

The equity rallies in New York and Tokyo and the belief that bond markets are overcooked has sent money pouring out of euroland.

The euro's prospects looked better when German unemployment fell marginally. But gloom returned after industrial output fell. Most economic institutes expect second-quarter numbers to show Germany in recession. The OECD did not help by forecasting French output this year will expand by less than 1%. Britain is caught in the crossfire.

The whiff of weakness about growth has heightened thoughts of an interest rate cut tomorrow. The pound is in retreat, tumbling a cent against the dollar to $1.63 and staying weak against a sinking euro.

In the battle of wills between the City economists, who forecast no rate cut, and the dealers who believe it will happen, the latter seem to be winning.

Full Marks
SOME people may feel that a pay deal which, at the current share price, could yield £500,000 or more a year is excessive for a part-time chairman. However, Luc Vandevelde has found a way, with the pay committee, of directly linking his returns to those of shareholders.

No fancy options and repricing for the Marks & Spencer boss, nor any complex formulas based upon comparatives with other Footsie firms.

Instead, he gets a monthly package of shares that will move up and down with the markets. There should be no complaints about what is an innovative package.