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Council confirms NEC sale to Lloyds Capital arm for £307m

Council confirms NEC sale to Lloyds Capital arm for £307m

🕔16.Jan 2015

After many years spent steadfastly refusing to dispose of the ‘crown jewels’ Birmingham City Council has eventually bowed to the inevitable and agreed to sell the NEC Group for £307 million.

New owners LDC, the private equity arm of Lloyds Banking Group, will bring much needed venture capital to improve the National Exhibition Centre and allow the NEC to expand globally.

The sale, which is expected to be completed by the end of April, includes all NEC Group businesses.

The NEC site including the exhibition halls, the Genting Arena and the Resorts World development will be disposed of with 125 year leases.

In Birmingham city centre, the International Convention Centre, Symphony Hall and the Barclaycard Arena are to be sold on a 25 year lease.

Birmingham city council will retain a freehold interest in all of the NEC properties.

Disposing of the NEC Group has been an issue of considerable debate at the council almost since the exhibition halls were opened 40 years ago.

Both Labour and Conservative-led administrations strongly resisted the idea, arguing that a sale would mean foregoing long term profits for a short term gain.

But the council’s hand was forced two years ago when the scale of Government spending cuts became apparent and it became clear that selling assets was the only certain way to raise cash.

Money raised from selling the NEC Group will be used to help pay off a £1.1 billion equal pay compensation bill to thousands of current and former female council staff who successfully took legal action after they were underpaid compared to men performing similar roles.

The transaction values the NEC Group at around £307 million, £15 million of which will be in the form of a loan note, including the value of the leases of the Hilton Metropole and Crowne Plaza hotels on the NEC site which are being retained by the council.

The sale also protects the existing uses of all venues as well as Symphony Hall.

A council spokesman said: “Symphony Hall is located within the ICC and is managed, together with Town Hall Birmingham, by the registered charity Performances Birmingham Limited. The sale of the NEC Group will not affect the continued occupation of Symphony Hall by Performances Birmingham Limited.”

The council has retained a right to claw back land at the NEC site for future development and the transaction does not include various plots of undeveloped land adjacent to the NEC site to the east of the M42, which will be retained by Birmingham City Council.

Council leader Sir Albert Bore described the sale as a good day for Birmingham.

LDC would provide much-needed investment in a way that the council could not.

He added: “The announcement of a new owner is a landmark moment in the history and development of the NEC Group and its three operating sites: NEC, ICC and Barclaycard Arena.

“We are very pleased to have attracted a Birmingham-based buyer in LDC that understands the local importance of the NEC and shares our vision for the future.

“This will ensure that the business goes from strength to strength, and that the NEC continues to play a leading role in the wider economic development of the region whilst securing Birmingham and the wider West Midlands’ position as the home for outstanding live events.  We are looking forward to working alongside LDC to achieve this goal.”

Paul Thandi, NEC chief executive said: “NEC Group has thrived under Birmingham city council’s ownership and the region has benefitted enormously. Today, the council is able to realise substantial proceeds from this transaction whilst providing the group with an opportunity to benefit from numerous growth opportunities in the core and ancillary businesses and internationally, and ensuring it remains a cornerstone of the region’s economic prospects.

“NEC Group management and staff are motivated to realise our ambitions and accelerate our growth strategy under new ownership alongside LDC. From the start the management at LDC has understood the group’s potential with new ways of deploying investment in resources and capital to the benefit of the business, our customers, and our markets.

“Their support will allow us to capitalise on our market-leading position and our team look forward to building a new phase of organic and acquisitive growth.”

Mr Thandi sidestepped questions about the possibility of a management buyout.

But he revealed that he is talking to LDV about “a number of businesses want to buy.”

He added: “It is difficult to talk about precise numbers and how much will be invested, but LDV has an appetite to invest in our businesses. They want to help us grow our businesses.

“The NEC is a fantastic piece of real estate and there are great opportunities to capitalise on that.”

Genting UK, operators of Resorts World Birmingham, was quick to welcome the sale.

Peter Brooks, President and Chief Operating Officer said: “Genting UK has been working closely with the NEC Group and we enjoy a very productive partnership which has also resulted in our becoming  title sponsor of the Arena, which from this year has become the Genting Arena. We are confident that our relationship will continue to flourish and grow with the NEC under its new ownership.

“Resorts World Birmingham, when it opens later this year, will deliver an exciting leisure and entertainment destination to the NEC. Offering retail outlets, hospitality and entertainment,, it will dramatically enhance the experience of visitors to the NEC campus.”

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