The transparency of private equity-owned businesses came under the spotlight today, with British members of parliament questioning TDR Capital and its ownership of the supermarket chain Asda.
Appearing before the Business and Trade select committee, managing partner Gary Lindsay, chief operating officer Blair Thompson, and deputy general counsel Emma Gilks, responded to questions from MPs on the debt pile at Asda, its company structure as well as the health and safety concerns of workers.
Speaking at the hearing on 9 January, Labour MP and the chair of the committee Liam Byrne pointed out that the majority of the firm’s entities were registered in Jersey, meaning that they could not access their accounts.
Although TDR Capital’s deputy general counsel Gilks said Asda is ‘extremely transparent’, Byrne questioned why Jersey was chosen to register some of the holding companies in the group.
TDR Capital finally admitted that the jurisdiction would provide more flexibility when it sold off the company and that there would be no stamp duty in the event of a sale.
Transparency in focus
Managing partner Lindsay said the group would commit to greater transparency following the feedback from the hearing.
Byrne added that the opacity in private equity maximises risk rather than minimising it.
He commented: ‘Our fear as a committee is that many of the risks we saw in 2007-08, when you had accounting behaviour that was not well understood by regulators, led to people taking bad decisions in the dark and that didn’t end well for the British economy. We are concerned whether there are further steps that could be taken to maximise accounting transparency and therefore de-risk UK business at a time when interest rates are going to be higher for longer.’
As part of the same hearing, TDR Capital’s Lindsay said the firm is continuing to focus on growing Asda, after investing £1.3bn in the business over the last three years, in addition to money spent on acquisitions.
He added that the business had deleveraged since the third quarter of last year.
When asked whether TDR Capital was anti-union, Lindsay responded ‘absolutely not’ and said the firm takes its relationship with colleagues very seriously. Workers at Asda’s Gosport Superstore are set to strike next week.
TDR Capital acquired Asda in 2021 alongside the billionaire Issa brothers for £6.8bn using a combination of equity and debt.
Mohsin and Zuber Issa, who founded EG Group, were questioned by MPs last year. At the time, they sought to reassure the committee that the £4.2bn debt pile on its books shouldn’t cause concern.