News Column

CAYMANS' BASE FOR LEAHY FUND

June 14, 2014

By Rupert Steiner, Daily Mail, London



June 14--SIR Terry Leahy's stake in newly floated discount chain B&M is held through a fund registered in the Cayman Islands.

Leahy, chairman of the Woolworths-style discount chain, which has floated for pounds sterling 3bn, is a retail grandee and one of Britain's most highly regarded businessmen.

The former Tesco chief executive this week helped the Government launch the International Festival for Business to promote Britain's economic interests.

But the details contained in B&M's prospectus will raise eyebrows. It shows that the UK-based retailer has its tax domicile in Luxembourg, and the main shareholders have links to the tax-efficient Cayman Islands.

Leahy is a senior advisor to US investor Clayton Dubilier & Rice (CDR) which owns 60pc of B&M. In the fine print of the prospectus it says: 'Sir Terry Leahy has an interest in the shares held through CD&R Holdco as a result of his interest in CD&R Fund VIII.'

The document goes on to say that CD&R Holdco, also known as CD&R European Value Retail Investment, is 'a Cayman Islands limited partnership owned by the CD&R Investors, which is managed by CD&R'.

The prospectus reveals B&M paid just pounds sterling 6.9m in 'income tax expenses' on sales of pounds sterling 1.2bn for 2014. The company is a candidate for the FTSE100 index of leading shares and has been one of the biggest UK floats this year.

According to the prospectus, 'the company is a fully taxable company resident for tax purposes in Luxembourg'.

The prospectus also says it benefits from certain tax advantages.

'As a fully taxable Luxembourg resident company, the company should, from a Luxembourg tax perspective, be able to benefit from double taxation treaties and European directives in direct and indirect tax matters,' the document adds.

The three Arora brothers who founded the Manchester-based business have already made pounds sterling 380m from the 60pc stake sale to CD&R.

Last week they made a further paper fortune of pounds sterling 1.2bn from the 40pc stake they retain in the business.

Simon, Bobby and Robin Arora set up B&M Retail in 2004 selling toys, furniture, and food, mainly in the north west of England.

Conditional dealing started on Thursday with the shares priced at 270p. This was at the top end of the 230p to 290p range for the retailer.

Despite their wealth, the brothers will also benefit from paying no inheritance tax under Luxembourg tax laws.

'No estate or inheritance tax is levied on the transfer of the shares upon death of shareholder of the company in cases where the deceased was not a resident of Luxembourg for inheritance tax purposes,' the prospectus says.

B&M follows Poundland in being the latest discounter to float, capitalising on a boom in the sector.

The company saw pre-tax profit fall to pounds sterling 3.6m in the year to March 29, 2014 from pounds sterling 62.2m.

Much of the fall was due to financial restructuring which cost pounds sterling 102m.

Boss Simon Arora went to Manchester Grammar School, studied law at Cambridge and headed to the City where he cut his teeth at McKinsey, Barclays and 3i.

In 1995 he and his brothers created Orient Sourcing Services and sold soft furnishings to Argos and BHS. They sold this business in 2004 and bought B&M, which had just 21 discount stores with a turnover of pounds sterling 65m.

Expanding the group out of cashflow, they grew to 300 stores in just seven years with a pounds sterling 1bn turnover.

The company declined to comment yesterday.

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(c)2014 Daily Mail (London, )

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Source: Daily Mail (London, England)


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