Fast bucks all round as Saga and the AA form the Victor Meldrew conglomerate
MARTIN VANDER WEYER The £6 billion merger of Saga and the AA is a gift for cartoonists: a company whose ideal customer is Victor Meldrew with a broken fan-belt on the hard shoulder of the A22. To complete a brand conglomerate for grandads — and since all three are owned by private equity funds — why not bring in Boots the Chemist as well? But most of all, the deal is another gift for the GMB union, whose leaders Paul Kenny and Paul Maloney have led such a creative campaign to blacken the name of private equity that they ought to be preparing their acceptance speeches for next year's Baftas. They have already ensured that the AA — which was acquired by Permira and CVC Capital in 2004 for £1.75 billion, and subsequently shed 3,000 jobs — has had 'more media coverage this year than the Iraq war' (according to a rival union leader) even though the GMB is said to have only 100 members among AA patrolmen.
The scare story now is that the merger will lead to further job cuts (that's what mergers do, I'm afraid) from the integration of the two companies' administrative functions, and possibly of their insurance arms. But the real headline-maker, just when private equity could have done with a quiet week, is the news that Permira, CVC and Charterhouse (which bought Saga for £1.35 billion in 2005) will share at least £2 billion in dividends out of the deal. That dents the private equity men's defence that their profits are generally made only after five to seven years' hard application of management science to turn their purchases into better businesses. The AA has been given a swift cost-cutting shake-up but Saga is still very much the business it always was — and it's hard to see the £2 billion divi as anything other than a startlingly fast buck. Translated into individual pay-outs, it looks even more provocative: AA chief executive Tim Parker stands to pick up £40 million for less than three years' work, while Saga boss Andrew Goodsell will cash in £100 million worth of shares, paying only the nownotorious 10 per cent capital-gains-tax-withtaper-relief. The GMB would be proud to be called private equity's worst enemy, but private equity itself has an increasingly strong claim to the title.
Bold as brass Numerous readers have told me how perturbed they were by Edie G. Lush's article (How cyber-crime became a multi-billion pound industry', 16 June) about, among other things, the risks of identity theft and fraud we run whenever we part with creditcard details on the internet. I, too, have been perturbed by recent experience — but at least it provides an excuse to tell you about my sousaphone. It's a long story but stay with me, because it's also a curious parable of the opportunities and threats of globalised e-commerce.
It begins 40 years ago, when as a truculent schoolboy I gave up the effort to learn the trumpet, a failure I regretted ever afterwards. Fast-forward to last year, when I saw a rollicking production of Rigoletto by the Chisinau National Opera Company from Moldova, featuring naked lap-dancers in the opening revelries and an incredibly loud brass section throughout. By the time we got to `bella figlia dell'amore', poor old Rigoletto had been all but blown off the stage by the principal tuba. Purists were horrified: the tuba wasn't even invented when Verdi wrote the opera in 1850 and he actually scored the part for an older, quieter brass instrument, the cimbasso. But I thought it sounded tremendous. I decided there and then the tuba was for me — until some months later, when I lit on an even better idea while watching a jazz combo that featured a battered brass monster wrapped serpent-like around its player's body. 'It's a sousaphone,' the jazzman told me, 'named after John Philip Sousa, the March King. Same pitch as a B -flat tuba.' That evening I typed 'sousaphone' into Google: up popped an eBay link to the auction of a brand-new silver-brass model with a 22-inch horn, offered by Empire Brass Co of Delhi at a ludicrously low reserve of £149.99 (about a tenth of its retail value) plus the same again in postage. The auction was a few hours from closing and, overcoming the trepidations of an eBay virgin, I entered what turned out to be the only bid, and the lot was knocked down to me at the reserve price.
Next, eBay told me the seller's preferred payment method was via PayPal, eBay's own, supposedly secure system. I set up a PayPal account with a password and gave my card details. Payment was swiftly confirmed. So far so good. But by breakfast time another message had arrived, to all appearances from PayPal, telling me that someone in Belgium had tried to access my account and asking me to resubmit my details and password for verification. I ignored it, partly because my name did not actually appear in the message. Two days later came another, this one claiming that an iPod had been purchased on my account for delivery to a man called Johnson at an address in Massachusetts. Again I deleted without following the links — and no fraudulent items appeared on my subsequent credit card statement. Plainly these were `phishing' messages from a hacker, somewhere in the world, who picks up the email addresses of new PayPal account-holders.
It was a sharp warning, but it has not deterred me from feeding my credit card details to one website or another almost daily. The sousaphone duly arrived seven weeks later, and I love it. But think of the wider implications of this transaction. Was the Empire Brass Co of Delhi really able to make the instrument for less than £150, in which case any surviving British brassinstrument makers might as well pack up now? Or have both Empire Brass and I been tempted by the wizardry of the internet into a world beyond our control, in which choice is instant and limitless and prices are driven ever downwards, but sellers risk unnecessary loss and buyers risk constant exposure to cyber-theft? Has ecommerce become, in its short life, so slick and inertia-free that it endangers everyone involved? I wonder. Meanwhile, the only fraudster still active in this particular story is me, since I've told the world I'm going to be a sousaphone player but so far I can only get four notes out of it.
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