Send CVC to the sin bin

Daily Mail - - City & Finance - 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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