The Chamberlain News

NEC Group for sale as Birmingham city council announces ‘historic decision tinged with sadness’

Birmingham City Council has confirmed it is to sell the NEC Group in its entirety, bringing to a close the local authority’s 38-year ownership of the conferencing and entertainment company.

The council will not speculate on a price-tag, but the figure of £300 million has been mentioned in the financial press, which would qualify for one of the largest public sector disposals on record.

Sir Albert Bore, the city council leader, described the decisions to sell as “historic”.

He admitted a “tinge of sadness” but added that a new owner would be able to provide the investment required to make the NEC a “global brand” with an exciting future.

The council is inviting prospective buyers to take part in a pre-qualification process and expects to give further details about the sale in the summer.

Whoever buys the NEC Group is likely to be offered a 100-year lease for the National Exhibition Centre and shorter 25-year leases for the Birmingham city centre International Convention Centre and National Indoor Arena.

The purchaser will also have to agree to keep the NEC buildings for their current uses to “secure the profile of Birmingham and the West Midlands as a world class home of a broad array of live events”.

Sir Albert denied that the sale was driven by the council’s acute financial crisis.

Although the local authority has to find almost £400 million in savings over the next four years and meet a £1.1 billion equal pay compensation bill, Sir Albert insisted that the NEC sale would have gone ahead regardless.

The intention is to grow the NEC as a global brand, using its expertise to build and run conferencing and entertainment complexes in the Far East and developing countries. The risk attached to raising capital for such a strategy could not be taken by a council, Sir Albert said.

Sir Albert added: “Privatisation has been a feature of economic life in the UK for many years and the decision we have taken is consistent with that trend and an acknowledgment of the fact that business like the NEC get to the stage where it is better for them to be in the private sector.

“An appetite for investment and risk is required that is beyond what is appropriate for the city council.”

Paul Thandi, chief executive of the NEC Group, sidestepped a question about a possible management buyout, replying simply that the organisation would be sold to whoever could put together the best offer for the city council.

Mr Thandi stressed that the need for investment was based on “capital risk” and not simply on the amount of money that could be raised. He pointed out that the NEC Group has undergone significant investment recently under council ownership including £250 million for the Genting Resorts World Birmingham project that is due to open in 2015, providing a casino, new hotels and restaurants.

He would not be drawn on how much the sale of the NEC Group might realise, but said he envisaged significant interest across the world.

Last year the NEC Group chalked up revenue of £138.5 million and an operating profit of £15.5 million. Its venues attracted almost four million visitors, and the ICC will host the Conservative conference this October.

Mr Thandi added: “Assets like this don’t come up every day. It will be a very competitive process with international investors looking at these sites. The most important thing is that we want to work with someone who will follow our strategy.

“We want to turn this company into a global brand. There are acquisitions we want to make for our ticketing and catering businesses. The acquisition strategy and risk profile is something that the city council quite rightly says is not for us.