Select Committee on European Union Minutes of Evidence


Examination of Witnesses (Questions 440-459)

MR GREG MCMAHON AND MR JAMES JENNINGS

24 JANUARY 2007

  Q440  Chairman: Just before we perhaps look at some of those, just so that I understand, you have made one application for costs, or two different applications?

  Mr McMahon: No, one application for costs. Having got a successful prohibition decision in June 2002 we then claimed our costs, which we were entitled to. That was rejected by the Commission so we made a Court application, as one would do in the High Court in the UK effectively.

  Q441  Chairman: And then you got your order in June 2004?

  Mr McMahon: Yes.

  Q442  Chairman: Do you get an order for a specific sum, or for taxation or what?

  Mr McMahon: We got an order for a specific sum at that stage.

  Q443  Lord Burnett: On what basis was it? Full indemnity?

  Mr McMahon: It was significantly less than we had originally sought.

  Q444  Chairman: In the roundest figures what did you claim, and what did you get?

  Mr McMahon: I will try and remember. Whilst we carry on, can I think about what the answer is?

  Q445  Chairman: Yes.

  Mr McMahon: I would say it would probably be about 20 per cent of what we had incurred, at a rough and ready guess, but I am very happy to supply to the Committee a definite figure.

  Q446  Chairman: Are we talking tens or hundreds of thousands?

  Mr McMahon: I think we had incurred hundreds of thousands of costs and we got maybe £150,000.

  Q447  Chairman: I see.

  Mr McMahon: It was an extraordinarily expensive process.

  Q448  Baroness Kingsmill: It is an incredibly courageous thing to have done really and I am astonished that your board gave you the authority to do it, in a sense, given how long it was and how expensive. Can you give me a little bit of the flavour of why you decided to take the action? Was it an overwhelming sense of injustice, a sense of this being the only way to get your damages back? What was the rationale?

  Mr McMahon: There is a mixture of rationale. If you break it down, the first is that in our offer document to the shareholders of First Choice to buy the company from them we had said, having had what we thought was excellent external advice from our external legal advisers, that we were highly confident of regulatory approval, a phrase which began slightly to haunt us as the summer went on! We remained, however, of the view that the Commission ought to clear this transaction at the first stage and not even send it into the phase two serious doubts inquiry so, ultimately, when we were prohibited in September, we had been telling people around the City, if you like, that we were very confident we would get through on the phase two and if we did we would be back and bidding again—or we probably would be, subject to market conditions. That was one thing which we said we would get regulatory approval for. Secondly, we did think there was, as you put it, an overwhelming sense of injustice and we really thought that somebody ought to be held to task on this because we thought this was wrong, because the advice was that we should get through and we were not through and nothing had been established to show that we should not really get clearance, even at the second stage. The third aspect was that clearly this was a consolidating market. We were a fairly large player in a consolidating market and we were not sure whether this was effectively the end of the road for consolidation in our market so we wanted to get some clarity as to where the consolidation could go in Europe after this. So there was also the aspiration of finding out whether this decision was right and whether it could prevent future activity in the market across Europe.

  Mr Jennings: I endorse everything that has been said; there was still a sense of shock.

  Q449  Lord Leach of Fairford: I wonder whether we could explore some more of the soft tissue on this. You had, when you made the bid, about 41 per cent I think you announced that you had more or less locked up. Is that roughly right?

  Mr Jennings: Yes. At the start of the bid process we had irrevocables from certain of the shareholders in First Choice and we were able to announce that our offer had gone unconditional as to acceptance in late May.

  Q450  Lord Leach of Fairford: So before June 3 you had gone from about 41/42 per cent to a majority?

  Mr Jennings: We had over 50 per cent—

  Q451  Lord Leach of Fairford: The hedge funds had presumably bought stock?

  Mr Jennings: Yes. We had made an announcement to the Stock Exchange that our offer was unconditional as to acceptances.

  Q452  Lord Leach of Fairford: So at that stage you were conditional only as to regulatory approval by June 3?

  Mr McMahon: Yes. We had gone through the 50 per cent and were just conditional upon the regulatory process.

  Q453  Lord Leach of Fairford: Were your own shareholders supportive of this, or were you under pressure not to re-bid, or to re-bid?

  Mr McMahon: The transaction was subject to our shareholder approval, which they gave quite convincingly.

  Q454  Lord Leach of Fairford: Subject to your own shareholders' approval?

  Mr McMahon: Yes.

  Q455  Lord Leach of Fairford: As well as regulatory approval?

  Mr McMahon: Yes. It was also subject to shareholder approval by the First Choice shareholders.

  Q456  Lord Leach of Fairford: But it must also have been subject to approval by your shareholders?

  Mr McMahon: Yes. Our shareholders approved it. After our transaction was announced First Choice announced a different transaction with a different party.

  Q457  Lord Leach of Fairford: With Kuoni?

  Mr McMahon: Yes, and the First Choice shareholders convincingly turned that down.

  Q458  Lord Leach of Fairford: But the Commission cleared it, if I am not mistaken?

  Mr McMahon: I think the Commission cleared the Kuoni transaction, yes.

  Q459  Lord Leach of Fairford: They were advised by Lazards, Herbert Smith and Clifford Chance, I think, if I am not mistaken?

  Mr McMahon: I think so, yes.


 
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