British United Shoe Machinery - Failed Flotation, Apax Partners and Pension Collapse

Failed Flotation, Apax Partners and Pension Collapse

Initial optimism turned sour and the flotation was cancelled, leading to its acquisition in 1995 by Venture Capitalists Apax for £131M. John Foster retired in 1996 and received an OBE. Apax appointed Dr Neil Coutts as BUSM Chief Executive and later that year, the company completed its largest ever factory, employing 7000 people in Vietnam.
In 1997, USM-Texon announced they would demerge into British United Shoe Machinery and Texon UK "in order to increase the focus on their respective businesses."
The award-winning Research and Development department's budget was "promptly cut.. by 60 per cent" and Chris Price left for Rolls Royce where he eventually became an Executive Vice President. On completion of the demerger in 1998, Coutts joined Apax owned Dexion which went into receivership in 2003, leaving workers worse off than if they "had never joined the Dexion scheme." Coutts remained a BUSM director, others included Jon Moulton, the Apax former head of Buyouts and Roger Earl. Earl was to head the 2000 Management buyout in which Moulton was the majority shareholder and controlling interest. Tim Wright of Apax was a common director of both BUSM and Texon's parent company. The company failed to thrive. In February 2000, Crispin, a key IT asset, was sold by installments to Texon, allegedly at a knock down price. The company continued to manufacture machinery, producing a stock pile which remained unsold until purchased from the Administrator by the management buy out company. On 14 September 2000 the USM-Texon scheme transferred assets into the BUSM plan set up in March 1999. On 30 September a new valuation of this scheme showed it needed payment of £2.3m to meet Guaranteed Minimum Pension. Around 1 October, the third and final installment for Crispin was paid and on 4 October the bank put in Administrators.

The failure caused little initial surprise or anger as shop floor Convenor and Pensions Trustee Bob Duncan had long assured workers that whatever happened to the Company their pensions were safe. Unfortunately and unknown to Duncan, the official advice on which this was based on simply wasn't true. As one of four Judicial Review litigants, Duncan played a key part in Dr Ros Altmann’s eventually successful Pensionstheft campaign. Invited to give evidence before the Public Administration Select Committee, Duncan blamed the government’s misleading information. The Committee agreed.

Once the Independent Trustee revealed the full extent of the pension loss in January 2002, Apax’s alleged role in the collapse of the company came under scrutiny. Three separate complaints were made, all rejected on the grounds of jurisdiction leading Dr Ashok Kumar MP to tell Parliament that "Some serious joined-up thinking is needed on all these issues". Duncan complained to OPRA but this organisation at that time could only investigate alleged wrongdoing by Trustees and notoriously lacked effectiveness The regulator did say that the complaint contained information which "might be of interest to the DTI" though a dossier submitted via Patricia Hewitt under Section 447 the Companies Act 1985 was rejected as the DTI could not investigate unincorporated bodies such as pension schemes, an investigation was unlikely to be effective, and complaints were best handled by the Pensions Ombudsman.

Workers then complained to the Pensions Advisory Service and then to the Pensions Ombudsman. Apax’ solicitors immediately challenged his right to investigate a share holder under the PENSION SCHEMES ACT 1993, PART X which limits jurisdiction to scheme trustees, managers or employers. This forced the Ombudsman to drop the lead case and to advise others that "any complaints against directors of Texon or Apax would be outside the Pensions Ombudsman's jurisdiction as they are not employers, trustees, managers, or administrators in relation to the BUSM Pension Plan". Following advice from Ros Altmann workers went to see their MPs, and also found strong support from both National and local newspapers. They blamed Apax for having engineered the collapse Edward Garnier named Sir Ronald Cohen and asked what discussions "ministers have had..about the collapse of the pension scheme". Patricia Hewitt, the Health Secretary and a local MP also called for an enquiry. In a letter to Alan Johnson MP,the Department of Trade and Industry minister, she recommended "that the Companies Investigation Branch should look at the concerns raised by my constituent. It may be that the problem falls between DTI and OPRA; but it is clearly important that such serious allegations are properly investigated." The response merely referred to the CIB investigation in 2002 and its conclusion that "the issues raised were best dealt with by other bodies." Garnier raised the issue again with the new Minister for Pensions Reform Stephen Timms citing the "mysterious circumstances" under which the pensions disappeared. Timms agreed to "look into" the complaints saying that "in recent years, there have been too many instances of that kind." The press expected a proper enquiry. In September 2005 Timms wrote back to Edward Garnier saying that the Pensions Regulator had found no breach of Pensions Regulations, though the Pensions Ombudsman was still investigating two complaints. Neither organisation of course could investigate Apax so Timms' "investigation" revealed nothing new.