The slow and painful demise of that once-great industrial conglomerate known as GEC has become a textbook example of corporate hubris followed by nemesis. It is a story of how two managers inherited an empire and a £1bn cash pile from Lord Weinstock, changed the company name to Marconi and then brought it to the very brink of destruction through a series of suicidal takeover deals carried out at the height of the dot.com boom.
The inevitable and painful financial restructuring which followed saw Marconi's shareholders all but wiped out. Four years later much of what was left of the company was sold to Ericsson of Sweden. The remaining rump was renamed Telent. In turn, this business too was due to have been swallowed up last week by a US private equity firm called Fortress Investment Group. The takeover would have removed the last vestige of what was once GEC from the stock market and, with it, brought the extraordinary rise and fall of an industrial dynasty to a final close.
But the deal was scuppered at the last minute after an unseemly squabble with another private equity fund, Polygon, over the £500m pot of cash set aside for former Marconi pensioners in an escrow account. And so Telent limps on.
Yesterday another chapter was written into the GEC/Marconi/Telent story when the chief executive of the rump company, Mike Parton, announced he is quitting. Mr Parton was not on the board of Marconi at the time of those disastrous US takeovers. But he was the head of the division into which those newly acquired businesses were merged so presumably he bought into the strategy.
When Marconi went belly up in 2001, Mr Parton became part of the team that resurrected the business, working alongside a chairman brought in from outside, John Devaney.
In the subsequent five years, it has been a case of heads, he wins, tails he wins.Mr Parton has picked up around £9m in bonuses for selling off bits of the business and reducing its debts, in addition to being paid a very generous salary for doing his day job. Had the sale to Fortress gone through, then Mr Parton would have walked away with a pay-off worth a further £7m. As it is, however, he will still receive a severance deal worth about £3.2m.
To most mortals, these look like extraordinary sums and in other circumstances there might have been an outcry from investors and employees. Mr Parton's remuneration has not escaped the critical attention of the financial press. But he has managed to avoid a shareholder revolt by return some £2bn to investors along the way. The pension fund is also happy because the hole in the deficit is covered several times over by the escrow account. And even the workers are relatively sanguine. For now Telent has a viable future although how long it can realistically survive in a telecoms equipment industry dominated by a handful of huge foreign players is a moot point.
As for Mr Parton, he remains a relatively youthful 51 and ambition still burns bright. Although he has no need to work again, he wants to slip into another full-time executive role. After the bruising but financially rewarding experience of the past six years, it would not be surprising if he joins the growing exodus to private equity, where managers can continue earning telephone numbers without anyone ever finding out.
Coach inquiry takes a peculiar turn
What is it with the competition authorities and public transport? Whenever the two collide, the result invariably seems to be a perverse ruling and we had another example of one yesterday.
The Competition Commission has decided that the merger of Stagecoach and Scottish City Link's coach services north of the border could lead to higher fares and a reduced level of service on two of the country's key routes - Glasgow to Aberdeen and Edinburgh to Inverness. That, is says, would be bad news for thousands of pensioners, students and tourists.
The Commission is now consulting on a range of remedies, up to and including a forced disposal of the two routes. It has reached this conclusion because it thinks the merged company will result in a substantial lessening of competition in passenger transport services. Apparently, the Commission does not regard the train as a competitor to the coach and thinks that if the merger is allowed to stand Stagecoach and Scottish City Link will exploit their monopoly by jacking up fares.
Strange then, that the Competition Commission reached exactly the opposite conclusion nine years ago when the coach operator National Express won the ScotRail franchise. At the time National Express owned the Scottish City Link coach franchise, but the Commission insisted that it had to be sold off in order to preserve competition between, you've guessed it, coaches and trains. Today, it seems that they no longer compete, at least as far as the regulatory authorities are concerned.
Stranger still, that the Competition Commission was perfectly happy to allow First Group to take over ScotRail last year, a deal which hands 70 per cent of the entire public transport market in Scotland to one operator.
Stagecoach is understandably seething and has warned the Commission that its ruling puts the future of coach services in Scotland at serious risk. Like as not, if the two companies are forced to separate their coach services on the routes concerned then one or other will be forced to pull out of the market. Stagecoach was preparing to do precisely that on the Edinburgh-Glasgow service until the merger with Scottish City Link took place, which is the only reason the Commission is not demanding the divestment of this route too.
Stagecoach is now seeking an urgent meeting with the Commission to voice its concerns. History suggests it will get little change out of the regulator. Instead, it will probably have to wait for the next time the Commission investigates public transport in Scotland and makes another of its peculiar U-turns.Reuse content