Supplementary memorandum submitted by
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
Given the news about the new company we now
have a number of questions regarding Mr Buffini's evidence to
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
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