Daily Mail

Send CVC to the sin bin

- Alex Brummer CITY EDITOR

THE Six Nations Championsh­ip should consider carefully who it is dealing with before selling itself to private equity group CVC.

As handsome as the £500m bid from CVC might seem, private equity owners are not a benevolent society.

Operating behind closed doors, they can use that status to build businesses, but are just as likely to be ruthless in decision making. The goal normally is to offload the assets in as short a time as possible at far higher prices.

CVC has some UK history in this. The origins of the current crisis at Debenhams can partly be traced back to its period in private equity ownership, when CVC was one of those involved. Texas Pacific, CVC and Merrill Lynch Private Equity bought Debs for £600m in 2003. The value of the investment trebled in three years after it sold the freeholds, cut costs and added to debt. Onerous leases stretching out for decades are among the key problems.

A diminished Debenhams has a Hobson’s choice. It can trust its fate to hedge funds Alcentra, Silver Point and Angelo Gordon, which own a chunk of Debenhams debt. Or it could accept the offer of Sports Direct owner Mike Ashley who wants to pump in £160m interest free, providing he gets the job of chief executive.

If Ashley really wanted to play fair with Debs stakeholde­rs, he would make an offer for the outstandin­g 71pc of shares on the open market and take full control in a transparen­t way. He has chosen a different route because it may be easier to shed obligation­s, including debts, if he took on the debt and opted to put the enterprise into prepack administra­tion.

By making the interest-free loan conditiona­l on his own appointmen­t as boss, he is seeking to cajole stakeholde­rs into putting him in charge.

All of this action takes place long after Debs’ private equity ownership. But it means that for more than a decade the retailer has been operating under a shadow. The reason CVC is seen as a suitable bidder for Six Nations rugby is that it has expertise with sports franchises, having bought Formula 1 motor racing from its spirited creator Bernie Ecclestone.

CVC paid in the order of £1bn for F1 and almost a decade later sold it to John Malone’s Liberty for £8bn. As the new owners discovered, most of the low hanging fruit had been picked by CVC.

Liberty has modernised F1 by introducin­g digital platforms. But motor sport followers complain that it struggles with setting financial, regulatory and sporting objectives for the future.

The Six Nations is the jewel in crown of internatio­nal rugby, much admired in the Southern Hemisphere. Handing over the franchise to private equity for short-term gains would be a disastrous error.

Big Ben

BIG oil counts everything it does, from exploratio­n to cash flow, dividends and profits, in the tens of billions of dollars.

Ben van Beurden, chief executive of Shell, has made a contributi­on to the big numbers. He bought BG in the face of shareholde­r scepticism and then offloaded $30bn of unwanted assets.

His purpose is to guide Shell to a future based around natural gas, renewables, charging points for electric cars and domestic energy.

Oil companies pay employees well. Many work in harsh conditions on rigs in deserts, oceans and the Arctic. Shell’s Anglo-Dutch heritage means it has been regarded more like the civil service and a symbol of corporate reticence than a gung-ho American oil major.

Disclosure that van Beurden’s long-term share incentives have come good, and he had a pay packet of £17.8m this year, is embarrassi­ng, even though it is peanuts compared to Jeff Fairburn’s reduced payout of £75m at housebuild­er Persimmon.

The Shell chief’s pay is still 143 times that of the astonishin­gly high median pay of £124,000 per head among Shell’s workforce. Given the generosity of wages, few workers will be complainin­g.

Neverthele­ss, it shows how the pay of bosses moved off the map at a time of post financial crisis austerity. That is not a good signal for free market capitalism.

Enjoying the craic

BREXIT uncertaint­y and wrangling over the backstop is not casting a cloud over Ireland’s economy. Growth jumped 6.7pc in 2018 making it the fastest growing nation in the EU. Debt as a percentage of total GDP fell to 68pc. The UK should be so lucky.

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