Goldman Sachs warned Arcadia Group of concerns about Retail Acquisitions before the deal to sell BHS went through, MPs were told on Monday evening.
Anthony Gutman, co-head of investment banking services for Europe at Goldman Sachs, was among those to give evidence to a joint session by the business, innovation and skills committee and the work and pensions committee into the sale of BHS and its subsequent collapse into administration.
Goldman Sachs said it offered informal advice to Arcadia Group on the sale of BHS in late 2014, although it was not paid for its services. Gutman told MPs the bank highlighted that Retail Acquisitions owner Dominic Chappell had a history of bankruptcy.
In a later session, Arcadia Group finance director Paul Budge admitted he knew of “one bankruptcy at the time”. When asked by MPs if he knew about the others – Chappell has been bankrupt three times – Budge repeated: “Not at the time.”
He added: “We were cautious. It’s one of the reasons we took informal advice from Goldman Sachs back in December 2014.”
He also admitted being warned about Chappell’s lack of retail experience, “which we took on board”.
But Budge said Goldman Sachs advised Arcadia that Chappell had proof of lines of funding amounting to £120m, which “meant they were able to get funding to the business and their intentions were serious in terms of funding the business as a going concern”.
He said that, once the decision was made to sell BHS to Retail Acquisitions, there followed four weeks of “the most heavy due diligence I’ve ever seen”.
Lord Grabiner, non-executive chairman of Taveta Investments, the company through which Arcadia Group owners the Green family hold their UK retail interests, told MPs he had “no doubt whatsoever” that BHS would have gone into administration had a buyer not been found.
He said: “This is the most fundamental point in the story – if the deal hadn’t been done with this particular buyer [Retail Acquisitions], BHS would have gone into administration 12 or 13 months earlier than it actually did.”
However, he revealed he was absent from the meeting at which the decision to sell BHS was taken.
He said the sub-group discharged with selling BHS, which included Budge and Arcadia Group chief executive Ian Grabiner, ”did know that he [Chappell] had a bad history in terms of previous bankruptcy or bankruptcies”.
He added: “My view is that they must have taken that into account when coming to a judgement. If they didn’t, they failed in their duty.”
MPs also heard evidence from KPMG yesterday. Read the story here