Venture Capital
The filleting of Little ChefWORKERS, FEB 2007 ISSUE
The Little Chef roadside restaurant chain has supposedly been saved from closure. Analysis by the GMB union of how the closure threat arose is illuminating. In 2003 the venture capital company Permira, using £712 million of borrowed money, bought 368 Little Chef restaurants and 22 Travelodge hotels from Compass. Using sale and leaseback they raised £280 million on 130 sites.
They promptly shut 130 sites. The remaining 238 restaurants were sold for £52 million in 2005. The Travelodges were sold for £675 million in 2006.
So an original investment of £712 million yielded Permira £907 million, a clear profit of £200 million in three years. In addition, it claimed management fees and commissions, plus tax relief!
Permira is the finance company that has recently taken over the AA, resulting in 1 in 3 staff being dismissed, higher prices and a £500 million loan to pay for a "special dividend".
Described as venture capitalism and lauded by the government, it has the hallmarks of highway robbery.