Lloyds buyout bosses to reap huge NEC windfalls

By Mark Kleinman, City editor
The executives who run Lloyds Banking Group's private equity arm could receive a collective windfall of more than ?100m from a sale of the NEC Group, one of Britain's biggest live events and exhibitions operators.
Sky News has learnt that Martin Draper‎, the chief executive of LDC, is in line for a payout worth tens of millions of pounds if the NEC is sold for €800m or more in the next few months.
The prospective jackpot for LDC executives is likely to prompt renewed questions‎ about the deal which saw the firm buy the NEC, which hosts shows such as Crufts, from Birmingham City Council less than four years ago.Sources‎ said on Thursday that the overall potential payout to LDC and its employees could exceed €125m, with a frenzy of interest from prospective buyers of the NEC potentially pushing its price up to close to €1bn.Talks with a range of interested parties, including private equity firms, pension funds and sovereign wealth funds, have got underway in recent weeks.The sale will be the biggest in LDC's history.The bonanza for LDC bosses will be generated by 'carry', or a share of the profits, arising from an auction of the NEC.Although that model‎ for distributing windfalls from asset sales is typical across the private equity sector, LDC is unusual in that it operates annual funds and has only one investor - the UK's biggest high street lender.Most of the profit from the disposal of the NEC will be returned to Lloyds in the form of a dividend, while the NEC's management team, including chairman ‎Peter Philipson and Paul Thandi, chief executive, are also shareholders in the business.Mr Thandi has expressed an ambition "to build Disneyland in Birmingham".LDC paid just €307m for the NEC in 2015, with the deal said to have contained only a limited anti-embarrassment clause which has already expired.The NEC Group counts Birmingham's National Exhibition Centre, the International Convention Centre and the Genting Arena among its assets.Its venues have played host to ‎popular events such as Crufts, the world's most famous show for pedigree dogs, last summer's Dinosaurs in the Wild exhibition and musicians including Ed Sheeran and Lady Gaga.It is also due to stage parts of the 2022 Commonwealth Games.A spokesperson for LDC said it would not comment on "speculative valuations" and described the prediction of an overall €100m-plus windfall for executives and a suggested €30m payout to Mr Draper as "materially inaccurate".The spokesman declined to provide further details of the likely payments, which will ultimately depend on the price that the NEC is sold for.
"Revenue and profit [at the NEC Group under LDC's ownership] have increased significantly thanks to a number of transformational changes, new agreements with leisure operators, new sites and new exhibitions, and the business is well-positioned for further growth," he said."Like all private equity firms, our team invests in the companies we back, alongside our funding partner Lloyds Banking Group and the management teams we support."This is designed to align interests and ensure all parties participate in the success or otherwise of our investments."LDC has sought to play down comparisons between the business it bought in 2015 and the NEC as it is today, with tens of millions of pounds spent on capital expenditure projects since then.It has also established partnerships with leisure groups such as Merlin Entertainments, the owner of Legoland, in a successful effort to boost revenues and visitor numbers.NEC Group's transformation under LDC's ownership was underlined during the summer when it reported a 2.8% rise in sales to €162.1m for the year to March, with profits in the same period up 9.8% to €54.7m.As well as its live events venues, NEC owns The Ticket Factory, a ticketing agency, and Amadeus, a catering business.The group has also expanded geographically, securing the contract to operate the refurbished Bradford Odeon as a major live events venue in the north of England.A person close to LDC said it had also invested in the group's customer data analytics operation, which had helped to double footfall across its venues over the last three years.In total, the group has more than 2,000 employees and boasts seven million visitors to its sites annually.If it does attract a price-tag of €800m or more, it would represent LDC's biggest-ever exit from an investment, according to people close to the firm.LDC invests hundreds of millions of pounds annually in small and medium-sized businesses, and occasionally flirted with controversy during its parent's nine years in partial state ownership.
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The NEC auction is being handled by Bank of America Merrill Lynch.A spokesman for Lloyds, which provides limited information on LDC's finances in its public filings, declined to comment.
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