LDC, the private equity arm of Lloyds Banking Group has been announced as the buyer of The NEC in Birmingham.
The deal was officially announced by Birmingham City Council at a press conference at The ICC in Birmingham this afternoon.
The council said it had entered into “a binding agreement for the sale of the NEC Group to LDC. Bringing the NEC Group under private ownership will enable the business to maximise its growth opportunities and achieve its strategic potential”.
The statement continued: “LDC has been selected after an extensive sale process. The transaction maximises proceeds for Birmingham City Council and is consistent with the Council’s vision and strategic ambitions for the NEC Group and the wider regional development. LDC is providing the equity funding for the acquisition, with the provision of debt being led by Macquarie Bank”.
The transaction values the NEC Group at around £307m, £15m 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 encompasses all NEC Group businesses, with the Council providing a 125-year leasehold interest in the NEC site (including the NEC Exhibition halls, The Genting Arena – formerly the LG Arena, and the Resorts World development), and 25-year leasehold interests in the International Convention Centre ‘ICC) and Barclaycard Arena (formerly the National Indoor Arena). Birmingham City Council is retaining the freehold of all the NEC sites. The transaction also protects the existing uses of all venues as well as Symphony Hall.
Birmingham City Council has retained a right to claw back certain non-core land at the NEC site for future development. The transaction does not include various plots of undeveloped land adjacent to the NEC site (primarily east of the M42), which will be retained by Birmingham City Council.
NEC’s defined benefit pension schemes, which have been closed to the accrual of future benefits since 2010, will be retained by and benefit from the continued financial support of Birmingham City Council. The sale of the NEC Group and the transfer of the schemes do not have any impact on the benefits payable to members under these schemes.
Sir Albert Bore, Leader of Birmingham City Council, said: “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 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 while 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.”
Martin Draper, LDC’s chief executive officer, added: “The NEC Group is one of the UK’s best known and iconic businesses, particularly so in the Midlands, where it is at the heart of the region’s commercial and leisure activities for many years.
“The NEC Group has developed significantly over recent years and we are delighted to be working with such a strong and experienced team to deliver the NEC’s next exciting phase of development. We also look forward to working closely with both Birmingham and Solihull Councils to support their plans at both the NEC and City Centre sites which include the airport expansion, redevelopment of the Paradise Circus area and in connection with the HS2 project.”
Paul Thandi, NEC Group’s chief executive said: “The successful conclusion to the sale process is very good news for all concerned. 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.”
The transaction is expected to complete in the second quarter of 2015.
Chris Skeith, CEO of the Association of Event Organisers, welcomed the news. “The AEO is pleased to hear that the sale of the NEC is finalised, and we look forward to working with the new owners and continuing our relationship both as an association and as individual members. If you take a wider look at the ownership structure of the venue stock in the UK there is already a great variety of privately owned and council owned venues. The key for the industry is for any venue to work in partnership with organisers, suppliers, and customers to deliver great customer experiences and that there is investment to ensure the long-term success for the sector.”
Ellis Salsby, MD of the booking agency Ellis Salsby Ltd, tells CN news of the sale of The NEC is “fantastic for the Midlands and the wider events industry”.
“The sale provides the opportunity for the new owners to continue and progress the great work already done by the NEC team to raise the profile of this world class venue by creating the much needed investment to take it to the next level.
“They already have a great offering and this will only make thing better for the events industry as a whole as well as the region.”
Another leading agent based in the region, Chris Peacock, director of Conference Care, has also welcomed the sale from Birmingham Council into the private sector, “particularly as the buyer is from British private equity.
“Many of the US equity buys in our industry seem to be based on the paper asset rather than the hotel/venue/group itself.
This contributes to the constant state of change we’re all experiencing at the moment, and adds to uncertainty and low confidence in the sector. I hope that a sale will give them more access to capital, and also allow diversification into new and different markets.”
The NEC Group is an important contributor to the West Midlands economy, delivering an economic impact of over £2bn a year, while supporting around 29,000 jobs in the region.
In addition to its four venues, the NEC Group has successfully established a number of related businesses. These include national ticketing agency The Ticket Factory, catering business Amadeus and NEC Group International which is taking its venue management expertise into the operation of third party-owned venues.
Birmingham was listed as a new entry on Expedia corporate travel division Egencia’s list of the top 20 business travel destinations in Europe.
Upgrades to its transport infrastructure, including a runway extension at Birmingham airport and the remodelling of New Street Station due to complete later this year and HS2 is on the horizon.
The signs are that an iconic institution, built in 1973, is now poised to strike out on a new independent journey to the global market.
Photo L-R: Martin Draper, CEO, LDC; Paul Thandi, CEO, NEC Group; Steve Aston, director, LDC
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