LEP close to wind-up with last business sale

MAGNUS GRIMOND

LEP, the heavily indebted transport group, took the final steps towards winding itself up yesterday after it announced the sale of its only remaining business to management. The sale, following the last-minute withdrawal of the freight group NFC from the bidding, ends nearly four years during which LEP has been operating under a lifeline from its banks.

The business concerned, LEP International, one of the top six freight forwarding firms in the world, has gone to management for pounds 1, along with the transfer of debts amounting to around pounds 30m. The deal was rushed through following the collapse on Wednesday of talks with NFC, originally unveiled in October. The transport group had been given exclusive rights in the negotiations.

David James, the company doctor who has run LEP since 1992, blamed the failure of the discussions on NFC's underestimation of the complexity of the freight forwarding business, which employs 7,000 people in 31 countries. However, there are suspicions elsewhere that Gerry Murphy, the NFC chief executive, may be finding deeper problems at the group than he expected when he arrived in June. NFC has been suffering badly from highly competitive markets and earlier this month it stunned the City with a 25 per cent slump in operating profits and a pounds 35m restructuring provision.

Mr Murphy told staff yesterday: "Whilst the strategic and commercial rationale for the deal remained attractive and we had developed an excellent working relationship with the management of LEP International, it has not been possible to conclude an agreement which would have been in the overall interests of NFC's shareholders." He added that the company remained committed to offering customers international logistical solutions and "will be actively looking for other ways of doing this".

The sale means that LEPI's parent company, LEP Group, has cut its outstanding indebtedness to 36 bank creditors led by NatWest from pounds 646m in 1992 to an eventual figure likely to be around pounds 110m. With Barclays and Lloyds, NatWest own 38 per cent of the debt. There is not expected to be any return to shareholders. Shares in the company were suspended at 3p in June, when the plans to sell the remaining businesses were announced. LEP has already completed the disposal of its US electronic security business, National Guardian Corporation, for a figure thought to be in excess of $300m. It said yesterday it would cancel its Stock Exchange listing from 29 December and move to call for a members' voluntary liquidation soon after.

Ironically, the new owners of LEP International are likely to include some or all of the 7,000 staff in an employee ownership scheme similar to the one adopted by NFC when it was privatised in 1982. Owing to the low level of capital involved, no outside financiers are involved in the management buy-out, which is being led by Jack Wasp, chief executive for the past four years.

Turnover is currently running at around pounds 1.2bn and profits before exceptionals in the year to December 1993, the latest period for which accounts are available, were pounds 6.5m. Net assets, including the bank debt, were pounds 68.2m.