It has also emerged that the Cable & Wireless parent group, which built New Mercury House for its UK telephones subsidiary in 1989, took a pounds 70m provision in its annual results last week to cover losses on the value of the office block. Details of the write-off were disclosed to analysts by Robert Lerwill, C&W's finance director.
Cable &Wireless Communications (CWC) also yesterday announced the appointment of a chief operating officer to work alongside Graham Wallace, chief executive. He is Greg Clarke, chief executive of C&W's mobile operation.
The option to take over the Mercury building agreed by CWC brings the demise of the Mercury brand and corporate structure a step closer. The CWC merger, completed last month, saw Mercury combined with three cable operators, Nynex CableComms, Bell Cablemedia and Videotron.
Some 500 managers are expected to lose their jobs over the next few months as the four companies move into the Mercury headquarters and restructure their administrative operations. CWC plans to launch a single brand name using the Cable & Wireless corporate identity by autumn.
C&W entered into a complex financing arrangement when it leased the building to Mercury in 1990. The pounds 70m provision reflects the difference between the value of some pounds 120m in the original deal and the potential purchase price for CWC, understood to be more than pounds 50m. Mr Lerwill said the provision covered the drop in property rental values during the recession.
Nicholas Mearing Smith, CWC's finance director, confirmed the group had agreed an option to buy out the building with C&W. "It's a substantial building and it's in the middle of London. We need some prestige office space for a company which has many large UK businesses as its clients," he said.
The headquarters was asource of friction between Mercury and its C&W parent. New Mercury House, directly opposite C&W's offices, was planned at the peak of the 1980s boom by Stanhope Properties, the troubled developer bought by British Land two years ago.
The deal caused controversy inside Mercury because Lord Sharp, the late C&W chairman, was also on the board of Stanhope. Lord Sharp, who died in 1994, did not vote on the decision to go ahead with the building.Reuse content