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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