Iceland’s One-Time Billionaire Plots Retail Comeback on U.K. High Street
Jon Asgeir Johannesson, the former Icelandic billionaire being sued by the bank that helped fund his expansion into the U.K., is planning to build a new retail “kingdom” there once he emerges from litigation.
“I’m still interested in business and have plans to continue doing business,” Johannesson, 44, said in an interview in Reykjavik. “I’m no longer interested in building any kind of empire again. It interests me more to own a little kingdom and manage it properly. I’m interested in the markets in Britain and the U.S., and the markets that extend from those.”
Johannesson, whose personal fortune grew to $1.6 billion a year before Iceland’s 2008 meltdown, according to the Frettabladid newspaper he owned, says a lawsuit against him brought by Glitnir Bank hf is based on “fiction” and likely to be dismissed. That will free him to pursue his next retail venture, and this time he won’t let things run out of control, he said.
“You can revel in past mistakes forever, but if you get stuck in the rear-view mirror, you’ll lose your creativity,” said Johannesson. “I’m 44 years old, full of energy and ideas, which will be useful in the second half.”
Johannesson’s fate has tracked the boom-to-bust trajectory of Iceland’s economy. His empire was built on funds borrowed from Glitnir, in which he was the largest shareholder. He epitomized the Icelandic entrepreneur of the 1990s and 2000s, as the island moved away from its reliance on fishing and tourism and became dominated by high finance.
“We were doing business with people that were doing the same thing in their own countries, where they enjoyed a high standard of living,” he said. “I wasn’t paying too much attention to what was going on in a small society like Iceland; I overlooked that what I was doing might be considered extravagant for the average Joe in Reykjavik.”
Since Johannesson’s empire collapsed in 2008, his fortune has shrunk to about $2 million, he estimates. He earns his living by doing consulting work for companies in the U.K., he said, without elaborating.
‘On My Own’
“The plan is to get going on my own,” Johannesson said. His next enterprise will respond to the “rapidly changing” retail landscape. “The Internet has changed everything and will continue to change the way consumers shop in the coming years. Shopping centers are becoming less and less relevant,” he said.
In the U.K. in particular, shoppers are relying more on Internet options, according to Johannesson. While he says brands will still need high-street outlets to display their goods in prime locations, the bulk of the industry’s trade will be in the virtual sphere.
“There will be a complete revolution in this sector,” he said. “In the U.K. people are saying that the high street is suffering because of the recession. That’s not the case: the high street is suffering because people’s shopping behavior is changing.”
Johannesson’s career started more than two decades ago. Together with his father Johannes Jonsson, he opened a chain of Bonus supermarkets in Iceland in 1989. His entry on to the British retail scene was financed through borrowing funds needed to snap up a number of U.K. brands. Johannesson’s expansion into that market included the acquisition of toy store Hamleys Plc (HYL) and department store House of Fraser Plc. Both have since been sold.
He says his biggest mistake was to continue expanding after his purchase of Big Food Group Ltd. (BFP) in December 2004 for 326 million pounds ($510 million).
“When I look over my shoulder, it’s easy to say that I should have stopped then,” Johannesson said. “If I’d done that, I’d probably be one of the richest people in Europe. Of course I regret that, but you live and learn.”
Now, the liquidator of failed Baugur Group hf, the investment company through which Johannesson made many of his purchases, is also suing him. The group alleges he fraudulently took out assets from the company before its collapse and placed them in a private holding company owned by Johannesson’s family.
Johannesson isn’t only on the receiving end of lawsuits. He sued former Justice Minister Bjorn Bjarnason for libel and won the case before Reykjavik’s District Court.
The resolution committee of Glitnir, whose 2008 failure burst the bubble Johannesson’s empire was built on, wants him and five others to pay 6 billion kronur ($47 million) in damages for loans it says were illegal.
“Calling our lawsuit ‘fiction’ is of course completely unfounded,” Steinunn Gudbjartsdottir, the head of Glitnir’s winding-up committee, said by phone today. The fact that an Icelandic court upheld a freezing order on Johannesson’s assets “should speak to the merits of our case,” she said.
Gudbjartsdottir estimates it may take as long as two years before Glitnir’s case is “finally resolved,” she said.
The liquidators of Glitnir, Kaupthing Bank hf and Landsbanki Islands hf are still trying to collect funds to help repay some of the $85 billion the banks defaulted on in 2008.
Still, Iceland’s $12 billion economy is now recovering faster than Europe and the U.S. Gross domestic product will expand 2.5 percent this year, the International Monetary Fund said March 2. That compares with a 0.3 percent contraction in the 17-member euro area, the European Commission estimates. The U.S. economy will grow 2.2 percent in 2012, the World Bank said Jan. 18.
That’s not enough to persuade Johannesson to stay. He plans to leave once he’s sorted out his legal affairs, he said.
“Iceland’s market doesn’t excite me,” he said. “I have no intention of being here for long.”
To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik firstname.lastname@example.org.
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