Branson taps Virgin territory



Sir Richard Branson, the daredevil, billionaire entrepreneur, is hoping to expand his Virgin empire with the help of Middle Eastern cash. If he succeeds, Dubai can expect to experience first hand the sort of publicity stunts that have made Sir Richard so famous.

Sir Richard is one of the business world’s most unusual characters and he provokes wildly differing reactions in people. The old-school elite in Britain are sniffy about him and would rather take a cut to their share-option packages than admit genuine respect for his achievements. However, to the rest of the world he is an icon – particularly for ambitious middle managers and small business owners everywhere from Reading to Rajasthan. To these aspiring dreamers, Sir Richard is an inspiration for the simple reason that if a hippy scruff can make it, so can they.

A common complaint from the business world’s pinstripe brigade is that Sir Richard is, like his balloons, all hot air. They sneer at the motor-boating records, trans-world flights and space trips as mere publicity stunts and by doing so they dismiss Sir Richard’s greatest asset.

Bono, the lead singer of U2, has frequently said he uses his celebrity status to gain access to the people who can make a difference to causes he believes in, such as relieving African debt. Sir Richard has been doing the same in the business world for more than 30 years.

The image of Sir Richard as a self-made, billionaire adventurer gives him an aura that allows him to overcome personal and business limitations. The aura hides his shyness and dyslexia. It also seduces otherwise hard-headed money men into backing his numerous projects and I’ve seen powerful men go giddy like a schoolgirl in anticipation of meeting him (journalists are just as susceptible, by the way). This aura has helped Sir Richard build a $10 billion (Dh36.72bn) empire that contains six start-up companies with a turnover greater than $1bn. But while celebrity appeal is fabulous for opening doors and creating new opportunities it is a rather impractical asset for someone trying to run the day-to-day operations of a large corporation. Attention to detail is not Sir Richard’s forte.

That is why Sir Richard has quietly handed control of the Virgin Group, which includes the airline, mobile phone, money and media ventures, to a team of hand-picked investment managers. He remains the figurehead and provides the Virgin Group with its direction but the running of the business is left to others.

The man who really controls the Virgin Group is Stephen Murphy, an accountant who has been working for Sir Richard for 15 years. In a rare interview last year, Mr Murphy explained to me exactly what has changed within Virgin.

The group is now focussed on a handful of core sectors and it is developing a concept called “branded venture capitalism”. It works like this: Sir Richard decides that health businesses are going to boom so he launches a company called Virgin Active to run some gyms. His investment team buy a much larger British health club operator called Holmes Place, which is then rebranded with the famous Virgin name.

Virgin Active has now become a big player in the UK scene but the Virgin name is global in its appeal, so the group starts to buy and set up gyms in other countries. It currently has two in Dubai and is planning several more.

But global expansion is expensive so Virgin has hired Goldman Sachs to look at ways to raise capital. A £1bn (Dh7.32bn) stockmarket listing at the end of this year is one option, although market conditions are unfavourable at the moment and alternatives are being considering. Selling a stake in the business to a private equity group could work, but that bubble has burst and there is less money around than there used to be.

So, Virgin has turned to one of the only sources of capital that is still available in the current financial chaos: sovereign wealth funds. Senior Virgin executives met Dubai International Capital officials last month to discuss co-operation and possible deals and I understand that some specific proposals were drawn up.

Virgin and DIC teamed up last year to make a bid for the UK’s ailing Northern Rock bank but the recent meetings have taken their relationship much further and there is a good chance that we will see the first of perhaps several deals within 12 months. A partnership in Virgin Active is one possibility but also look out for DIC backing Virgin’s airline expansion and possible funding of Virgin Mobile’s move into the UAE and the Gulf.

Dubai should expect to see quite a bit more of Sir Richard in the near future and you will get to make up your own minds about whether he is a business visionary or an emperor with no clothes.

- David Robertson is business correspondent of The Times of London