With rumours flooding the market about the possible disposal of some, if not all, of beleaguered travel company MyTravel, the company's advisers Addleshaw Booth & Co and Slaughter and May will be battling to get any possible work in the offing.
MyTravel has issued three profit warnings in the space of five months and a review into its accounts has been launched because of aggressive accounting practices by the company's former auditors Andersen. Consequently, its share price has plummeted from a heady £4 in 2000 to 18p last week and analysts say the company will have to act immediately to pull itself out of its current crisis. The company has not confirmed whether any disposals are in the pipeline.
“They'll have to do something,” said Greg Johnson at ING Financial Markets. “There's a number of smaller brands that could be a possibility. However, [American subsidiary] TSI, which is considered the jewel in the crown, doesn't really fit with the European business strategy, so that could be a good possibility.”
Addleshaws has always enjoyed a strong relationship with MyTravel. In-house counsel Greg McMahon was an Addleshaws lawyer before being a partner at Garretts. He maintains very close ties with Addleshaw partners Paul Devitt and Richard Lee. The relationship with the firm was further strengthened when Garretts partner Tim Hamilton, who also acted for the company, moved to Addleshaws following the collapse of Garretts last year.
McMahon has spun as much work as he can the way of his regional friends. The firm advised on the company's most recent disposal, that of its European camping arm to HolidayBreak for £29.9m at the end of September. The firm also advised on a £300m subordinated convertible bond issue, sponsored by Merrill Lynch, and on the initial bid to take over competitor First Choice. Acting alongside Addleshaws on that deal was Slaughters, which was brought in to advise on competition matters and eventually took the case, unsuccessfully, to the Court of First Instance.
Some insiders argue that because of the company's dire financial situation, Slaughters may get the nod over Addleshaws to advise on the current situation. “Because of the situation that the directors of the group find themselves in, I think they would turn to the magic circle in this case,” one source said.
In the short term, if disposal work does fall Addleshaws' way, it will be quite a nice money-spinner for the firm. But if MyTravel itself or a significant number of its companies are disposed of, it could leave a major hole in the firm's corporate budget. “It's the firm's flagship client,” said a source, adding that the client brought in around half a million to a million pounds per year.
Slaughters' appointment would be ironic given that MyTravel's management is understood to have racked up a six-figure bill using Slaughters to overturn the European Commission's decision on the First Choice merger. In legal terms, the Court of First Instance decision a was trailblazing win for Slaughters and MyTravel, but it was a Pyhrric victory, with little tangible benefit for MyTravel shareholders. Slaughters' bill cannot have helped the company's financial woes.
