Pennant-Rea consortium received pounds 4m sweetener to buy bargain-pric ed HMSO
Friday 13 February 1998
National Publishing Group, the company formed by Mr Pennant-Rea and the venture capitalists Electra Fleming, paid pounds 54m for the Stationery Office in September, 1996.
But a highly critical report on the sale published yesterday by the National Audit Office, the Government's financial watchdog, disclosed that National Publishing Group's initial indicative bid was pounds 170m while the Government's advisers, Coopers & Lybrand, put a "benchmark valuation" of pounds 110m on the business.
The report revealed how the winning consortium whittled down its offer price over a four-month period as the deteriorating state of the Stationery Office's finances and business prospects became apparent.
It also disclosed that in the final few days before the business was sold, the Stationery Office was nearly bankrupted, suspending payments to suppliers because it was in danger of breaching its pounds 50m statutory borrowing limit.
The Cabinet Office under the Chancellor of the Duchy of Lancaster, Roger Freeman, therefore agreed to pay National Publishing the cash balances in the business at the point of sale which amounted to pounds 3.8m.
The Cabinet Office justified the payment on the grounds that: "Failure to compensate the purchaser in this way might well have led to a breakdown in the deal negotiations."
National Publishing subsequently told the NAO that the additional amounts owed to creditors exceeded the cash sweetener by pounds 2m. Since the takeover, it has also axed 1,000 jobs from the workforce of 2,500 at a cost of pounds 54m.
The Pennant-Rea consortium was one of 14 groups that submitted initial indicative bids in May, 1996. Its offer, at a price range of pounds 150m to pounds 170m was pounds 9m more than the next highest bid from Hambros.
By the time it submitted its final bid in July, the price had been cut to pounds 86m. In August it cut the offer price to pounds 69m, citing risks associated with taking on the businesses and other additional costs. In September it reduced its offer for a final time to pounds 54m because of delays in finalising completion accounts.
The NAO report is severely critical of the way the Stationery Office was run in the build-up to the sale, accusing it of "poor financial and management control", producing over-optimistic turnover and profit forecasts and having a badly-executed restructuring programme.
Although the original plan had been to float the business in 1997, the NAO said that the decision to bring forward the sale had no impact. "We found no evidence to suggest that a delay in the sale to improve the profitability of the business would have produced better value for money."
The costs of the sale to the taxpayer were pounds 2.2m - equal to 4 per cent of the proceeds.
Last night, Mr Pennant-Rea said the NAO report confirmed that the taxpayer had received value for money. "Given the failure of state ownership to restructure the business, the disciplines of the private sector were essential to secure the long-term health of the business."
- 1 VMAs 2015: Was Nicki Minaj and Miley Cyrus' awkward acceptance put-down real or staged?
- 2 If you're not already angry about the migrant crisis, here's a history lesson to remind you why you really should be
- 3 Rules on 5p plastic bags likely to lead to arguments at the check-out
- 4 Chaos breaks out in courtroom as father attacks killer of three-year-old daughter
- 5 I like Corbyn, but let's face it: we don't need another white man at the head of a political party
VMAs 2015: Was Nicki Minaj and Miley Cyrus' awkward acceptance put-down real or staged?
Bank Holiday Monday opening times: Are Tesco, Asda and other supermarkets open today?
Rules on 5p plastic bags likely to lead to arguments at the check-out
The nine most warmongering countries in the world revealed
Isis releases graphic video showing four Shia 'spies' being burned alive in Anbar, Iraq
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Jeremy Corbyn calls Osama bin Laden's killing a 'tragedy' - but was it taken out of context?
Tony Blair attacks Jeremy Corbyn's 'Alice In Wonderland' politics
Theresa May says migrants should be banned from entering the UK unless they have jobs lined up
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...