Sir Philip Green was explicitly warned by his informal Goldman Sachs adviser that the man he was thinking of selling BHS to had zero retail experience and was a former bankrupt, MPs have heard.
Anthony Gutman, the co-head of Investment Banking at Goldmans, told a joint committee of Parliamentarians probing the collapse of the department store chain, he made the “observations” about Dominic Chappell and Retail Acquisitions at a meeting with the top brass of Sir Philip’s Arcadia group in December 2014.
“The potential buyer did not have retail experience...The bidder did have a history of bankruptcy” he said. Mr Gutman also said Retail Acquisitions had a “highly preliminary business plan”, although he added that this was “not unusual” at this stage in a deal.
BHS collapsed into administration in April, leaving thousands of shop workers facing a reduction in their pension pay-outs. MPs from the Pensions Committee and the Business Committee are probing the circumstances of the sale of the business by Sir Philip to Retail Acquisitions for £1 in March 2015.
Despite making the negative observations about Mr Chappell and Retail Acquisitions in 2014, Mr Gutman said he did not suggest at the time that the prospective deal should go no further. “It was something they could have progressed…we did not rule it out” he said.
Mr Gutman stressed that he was offering Sir Philip advice for free and that Goldman was not under contract with Arcadia. Sir Philip reportedly formed a tight bond with Goldman and one of its most senior London partners, Michael Sherwood, after the retail tycoon worked with the investment bank during his unsuccessful takeover bid for Marks & Spencer in 2004.
Mr Gutman also revealed that an “association” between a double-bankrupt and reported convicted fraudster, Paul Sutton, and Dominic Chappell was known to Arcadia and Goldman prior to the sale of BHS in March 2015.
“We were notified by RiverRock [an alternative investment firm] that there had been an association” said Mr Gutman. “I think that observation was made direct to Arcadia group as well as to us.”
Sir Philip himself and Mr Chappell are set to appear for questioning before MPs next month. Sir Philip is under pressure from the Pensions Regulator to make a major contribution to top-up the BHS pension scheme, which on one calculation has a deficit of £571m.
The scheme has had to be bailed out by the Pension Protection Fund, which is funded by a levy on other private defined benefit pension schemes. Under the 2004 Pensions Act the regulator has the power to pursue former business owners who are considered to have avoided their responsibilities to fund schemes adequately.
Also appearing before MPs yesterday Paul Budge, the finance director of Arcadia, said: "We wanted this to be a thriving business. We seriously believed Dominic Chappell was surrounded by credible people." Mr Budge also said BHS was sold to Retail Acquisitions with £70m of cash and a £25m credit facility with HSBC guaranteed by Arcadia.
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