Supplementary memorandum from The Co-operative
Group (DFoB 26a)
As was explained during the course of the Co-operative
Group's appearance before the Committee on 21 October 2009, the
sale of ACC in 2004 was conducted by means of a controlled auction.
The Co-operative Group expected, and indeed it proved to be the
case, that a number of parties would express interest in the ACC
business. In consequence, a due diligence process was established
that would enable, as far as possible, the Co-operative Group
to treat those prospective buyers on equal terms. This process
involved:
(a) establishing a physical data room, located
in the offices of our contracted lawyers, which contained detailed
information regarding many facets of ACC's business. Such data
rooms are widely used in different types of transactions where
a vendor wishes to disclose a large amount of confidential data
to proposed bidders;
(b) providing the opportunity for buyers to meet
with ACC senior management and question them on the business and
its performance; and
(c) making available a detailed report, compiled
by KPMG, on the recent historic and prevailing financial condition
of ACC. This report, although commissioned by the Co-operative
Group, had a scope, as with the data room, regarded as sufficient
to meet all the orthodox requirements of prospective buyers when
examining a business such as ACC. Prior to completion of the transaction,
the report (including a small number of supplements specifically
required by Dairy Farmers of Britain (DFB) to assist its own diligence
and that of those providing finance to it in relation to the transaction)
was addressed to DFB thereby creating professional responsibilities
owed by KPMG to DFB. DFB paid for the cost of the report's preparation.
All of these elements are quite typical of a
controlled auction process of the type the Co-operative Group
elected to conduct, and there was no suggestion at the time that
the process had disadvantaged DFB or any other interested party
in any way. Any reservations DFB might have had about the adequacy
of information that had been made available to them could have
been dealt with by DFB either requesting supplemental information
(and indeed many such requests were made, and dealt with by the
Co-operative Group), or reducing their offer because of uncertainty
about the level of risk the ACC business might represent or withdrawing
from the transaction altogether.
The Co-operative Group
November 2009
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