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THE
SALE
PROCESS
4. Five initial bids were received, ranging from
£24 million to £39 million. The MEBO bid was the highest
and was between £5 million and £10 million above the
next highest.[4] During
negotiations, the gap between the top three bids narrowed substantially.
While two bidders increased their offers, the MEBO team reduced
its bid by £6.25 million to £32.75 million. Despite
the substantial reduction in its final offer, the MEBO team was
still £0.9 million ahead of the next highest bidder in terms
of total proceeds.[5]
5. The Department said that the fall in the MEBO
bid was caused by: the fact that the cash strip which the Department
extracted from the business was larger by £2.25 million than
the MEBO were expecting at the time of the initial offer; clarification
that corporation tax of £1.7 million was payable by the purchaser
and not the vendor; and the Department's unwillingness to provide
the MEBO with a warranty to cover future environmental risks which
resulted in the MEBO reducing its bid by a further £1 million.
These factors taken together account for almost £5 million
of the £6.25 million reduction from the upper end of the
MEBO bid leaving up to £1.25 million unexplained.[6]
6. We asked the Department to explain the role of
the MEBO team in the run-up to privatisation and what offices
they held during this period. The Department said that they were
excluded from certain decisions, a new chairman and finance director
were brought in and the non-executive directors of the airport
company signed a declaration that they would not be involved in
the sale process. Managers involved in the MEBO bid were excluded
from dealing with privatisation issues.[7]
The Department also said that all bidders had access to the same
information, that all parties were treated equally and that the
reduction in the MEBO team's bid was based on its judgement of
what the airport was worth.[8]
7. We also pressed the Department on whether it was
absolutely certain that there was no leakage of price-sensitive
information such as valuation figures to the MEBO team.[9]
Although the Department was satisfied that nothing underhand took
place it acknowledged that it had not re-examined the matter.[10]
Conclusion
8. We consider that the Department should have established
more thoroughly why the MEBO offer dropped substantially to within
£900,000 of the next highest bid. This was important to avoid
any suspicion that the outcome could have been influenced by the
leakage of price-sensitive information to the MEBO team during
negotiations.
4 C&AG (NI)'s Report, paragraph 2.6 Back
5 C&AG
(NI)'s Report, paragraph 2.13 and Table 3 Back
6 Q2.
C&AG's Report paragraphs 2.14-2.17 Back
7 Qs
23-24, 39; Evidence, Appendix 1, p16; C&AG's Report, paragraph
2.4 Back
8 Qs
93-97 Back
9 Qs
97-100 Back
10 Q44,
Q96 Back
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