Portals chief in hidden rent deal: Chairman sitting pretty in company's 4,000-acre 'tied cottage'

PORTALS, the paper manufacturer currently in merger talks with the printing group De La Rue, rents a magnificent country estate to its chairman, Julian Sheffield, without disclosing the information in its annual report.

Laverstoke House, estimated to be worth more than pounds 5m, is set in 4,000 acres of prime Hampshire countryside with gardens sweeping down to the River Test. Its trout fishing is said to be the best in the South of England.

A fair rent would be well over pounds 100,000 a year. However, the company refuses to disclose how much Mr Sheffield pays. 'He is responsible for the upkeep of Laverstoke House. There's also a rental agreement, but I can't quantify it,' said a company spokesman. 'It's a bit like having a tied cottage,' he added, with Mr Sheffield as 'caretaker'.

Although there is no evidence the hidden deal is in anyway improper, it will infuriate institutional investors, who are trying to enforce stricter rules on corporate governance.

The arrangement was pointed out last week by sources close to De La Rue, suggesting that its talks with Portals have turned sour. Shares in Portals jumped 28 per cent on rumours of a takeover bid, forcing the company to make a statement nine days ago. De La Rue is believed to be unhappy at the way it was forced into a premature disclosure of its interest.

The rental deal reflects the extent to which Portals has failed to shake off the influence of the founding Sheffield dynasty. Laverstoke House was originally the family seat.

It was built in 1798 by Joseph Bonomi, the highly respected Italian architect. It was later sold to Portals, which has an extensive non-industrial property portfolio, together with much of the remaining estate. Laverstoke Mill House, a converted mill in the same grounds, is now the company's registered office. In 1990, Mr Sheffield purchased another property on the estate from Portals. It was independently valued, and shareholders were asked to approve the transaction at an extraordinary general meeting, in compliance with the Companies Act 1985. They were also informed that Mr Sheffield was the tenant of Laverstoke House.

A company spokesman confirmed on Friday that Portals receives income from renting the property's fishing rights. But the details of its agreement with Mr Sheffield, including whether he is paying a market rent, remain secret.

The spokesman added that Portals planned to sell most of the estate, after it has been re- zoned for commercial use under the Hampshire Development Plan - following its strategy of selling assets after adding value. Given the short- term nature of the tenancy, he said it would be hard to find an alternative tenant for Laverstoke House. However, Mr Sheffield has been living there for the past 14 years.

In 1993, he received salary and pension contributions worth pounds 124,244, down from pounds 132,020 the previous year. He also owns almost 81,000 Portals shares, with options on another 41,378 exercisable at prices from 215p to 372p against the current price of 763p.

(Photograph omitted)

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