Select Committee on Treasury Written Evidence


Supplementary memorandum submitted by GMB

  Further to the evidence that was given last week to the Treasury Select Committee regarding private equity, we have been somewhat surprised by today's announcement regarding the merger of the AA and Saga into a new company.

  As you know our concerns about the private equity industry relates to the lack of transparency and corporate governance, as well as over leveraging of debt and potentials for conflict of interest.

  Given the news about the new company we now have a number of questions regarding Mr Buffini's evidence to the Committee.

  It is apparent to us that Mr Buffini must have been aware of this very lucrative merger deal when he gave his evidence, and that the deal itself provides a very instructive opportunity to evaluate the negative impact of the private equity industry.

  We would raise the following concerns:

    1.  How have the enormous valuations of £3.35 billion for the AA and £2.8 billion for Saga been reached?

    2.  What is the justification for taking out an additional £2 billion worth of debt on the new company, and are these loans on more or less favourable terms to the company?

    3.  Have the existing loans carried by the AA been repaid as part of this deal, or are they carried forward?

    4.  What provisions have been put in place to secure the pension schemes of both companies?

    5.  What level of disclosure about the terms of reference of the new deal would have been appropriate to the public interest compared to the small amount of information that has been released?

    6.  How does the formation of a new company trigger the release of management fees and other payment opportunities to the private equity firms involved?

    7.  What taxes will be due and payable in the UK related to this new deal?

    8.  What has been the cost to the Treasury of the taxes which have been saved by the private equity firms and their partners as part of this deal?

    9.  What are the public interest issues involved in the formation of a new private company, with exactly the same owners which trigger enormous payments to individuals?

    10.  What are the conflict of interest issues that need to be considered in this new partnership between three private equity firms?

    11.  Has the new corporate structure been designed to avoid TUPE regulations?

    12.  What plans do the new management have to "streamline" the business, and what consultation is envisaged with the existing workforce and their representatives?

    13.  What are the implications for workers terms and conditions in the new AA/Saga company?

    14.  Did the date of the Treasury Select Committee hearing have any impact on the date this merger was announced, and if so what was that impact and why was the announcement made after the hearing?

    15.  Should Mr Buffini been more candid in his responses given the fact that he clearly must have known about the deal?

June 2007





 
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