Freeman sets competition precedent with GUS ruling
The reclusive Barclay brothers scored a major coup last Thursday when former Simmons partner Peter Freeman unexpectedly cleared their acquisition of Great Universal Stores (GUS) while leading his first investigation as Deputy Chairman of the Competition Commission.
The commission ruled that the Barclays, advised by Slaughter and May and Lovells, need make no divestments whatsoever of GUS’s home shopping and delivery business.
Sources close to the Barclays were understandably complimentary about Freeman’s first performance. “Peter has been a practitioner, he understands business pressures,” said one.
The closure of the GUS deal comes as the Barclays are embroiled in an even more audacious and risky bid for the Hollinger media empire, which some commentators have already written off.
On the GUS deal, the Barclays used Lovells private equity partner Marco Compangoni for corporate advice. He has acted for the brothers for more than eight years.
On the competition side the Barclays instructed Slaughter and May for the first time, plumping for partner Malcolm Nicholson on the back of his famous victory over the European Commission in overturning the Airtours merger. Slaughters partner Bertrand Louveaux also advised on the deal.
The Barclays bought the beleaguered GUS without prior competition clearance, intending to merge it with Littlewoods’ home shopping arm, which they already owned. They bought GUS at a knockdown price, but the strategy was risky as the Competition Commission could easily have blocked the deal outright, or insisted on divestments that could have made it uneconomical. The precedents were bad: in 1997, the regulator blocked Littlewoods’ acquisition of the Freemans catalogue group, which would still have left the home shopping market more diversified than the GUS-Littlewoods deal.
Sources close to the Barclays say that they were always prepared for a ruling that they must divest the delivery business, where there are no major competitors.
GUS’s competitors made vigorous complaints to the Office of Fair Trading and the Competition Commission. The Barclay brothers were said to be surprised and, predictably, delighted that the eventual ruling cleared both home shopping and deliveries.
Sources say that the deciding factor was that the alternative was to let GUS fold with significant job losses. “It was a difficult decision to make,” said one source close the Commission, “because it opens up huge precedents”.
