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Ten men including the former City chief executive behind the Hotel du Vin and London’s Liberty department store have been given the official “cold shoulder” by the UK Takeover Panel, ostracising them from the country’s financial sector in its most severe form of punishment.
The City of London mergers and acquisitions watchdog has shunned executives connected to the one time owner of the Malmaison and Hotel du Vin hotel chains as well as Liberty, following what the panel called “the most complex investigation” in its 56-year history.
On Tuesday the panel said Richard Balfour-Lynn, a veteran hotelier who once ran MWB Group, and several others had misled shareholders and the panel regarding a series of transactions over a decade ago, by concealing the extent of their ownership of the company and then failing to make an offer for it.
The cold-shouldering marks only the fifth time that the panel has issued such a reprimand, which in effect bars British financial companies from working with recipients on takeovers for a number of years. Only eight individuals had previously received the punishment.
Staffed by a combination of employees and secondees from law firms and banks, the Takeover Panel’s limited formal powers belie the influence it wields over the City’s community of M&A bankers and lawyers.
The panel, which was created in 1968, most recently deployed the “cold shoulder” against the former Rangers chair Dave King in 2019, for contravening its code during a bitter battle with retail billionaire Mike Ashley for control of the Scottish football club.
Operating as an independent body within the City of London, which has its own idiosyncratic rules, the panel’s various regulations are collectively known as the City Code on Takeovers and Mergers — and are strictly adhered to by market participants.
Balfour-Lynn, 71, and two other former managers will also be forced to pay compensation of up to £33mn plus interest to affected shareholders, an exceedingly rare punishment from the panel. Balfour-Lynn unsuccessfully appealed against the compensation order.
The penalties follow a probe dating back to 2011, when the panel began looking into the ownership of then-listed MWB, which entered administration in 2012 and was liquidated six years later.
The panel found that three members of MWB’s management, led by Balfour-Lynn, concealed the fact that they had acquired control of it and then breached a regulation requiring them to make an offer for the group, in a series of transactions between 2009 and 2010.
While the management trio controlled nearly 30 per cent of the company, the panel said the individuals acquired another 2.5 per cent stake without disclosing that to the market. Furthermore, a 15.2 per cent stake in the company that was represented as controlled by activist investor Julian Treger’s now-defunct Audley Capital, was in fact acquired and controlled by the members of management.
The individuals “misled MWB Group shareholders and the market through a web of sham transactions and false trails stretching across many jurisdictions”, said Omar Faruqui, director-general of the Takeover Panel, in a statement. “Exposing their deceit and wrongdoing is testament to the skill and determination of the panel’s enforcement team.”
Balfour-Lynn, a serial entrepreneur, has held more than 300 company directorships and once ran the De Vere hotel and leisure group.
Patrice Huguenin and Camille Froidevaux, both lawyers working at Budin, a law firm with offices in Geneva, at the time of the investigation, have also been “cold-shouldered” for misleading the panel. The 10 individuals were each shunned for between one and five years.
A representative for Balfour-Lynn said his sole focus following the 2008 financial crisis was saving the company as the value of its assets fell, and that “when the company folded, he lost everything he invested”.
The representative added that Balfour-Lynn proposed a £2mn individual voluntary arrangement “to provide compensation to any eligible former shareholders of MWB”.
The law firm representing Treger did not respond to a request for comment. Huguenin and Froidevaux did not respond to email requests for comment.
The Financial Conduct Authority said in a statement that it was reminding “all regulated firms that they should not deal with the individuals mentioned above, or their principals, on any transactions to which the code applies” during the relevant period.
Lawyers at Gibson Dunn advised the panel.
