Baugur

"Jon Asgeir Johannesson of Baugur"

"Tarsem and I finally signed a deal with Palmi on 24 November 2004 in the London flat of Arev’s John Scheving (like all the Icelanders we met, he had a swish flat in Chelsea overlooking Stamford Bridge). We would buy the Iceland business for a fixed £ 160 million. Best of all we negotiated to leave the pension deficit behind with Booker. We agreed to pay a further £ 20 million, phased over our first year in the business, to take us out of the BFG pension scheme altogether and make a fresh start. This was without doubt the best £ 20 million we have ever spent. We also managed to negotiate a shareholders’ agreement whereby no dividend could be paid or any refinancing take place without the consent of the management. We were frightened that Baugur might want to strip cash out of the business. Why they agreed to it I don’t know but they were pretty broad-brush in their approach and once the deal was agreed in principle they weren’t too interested in the detail, particularly where Iceland was concerned: they were focused on the big opportunities in the property portfolio and Booker. We also negotiated that if they ever wanted to sell the company we had the right to buy provided we could match the price. These conditions later proved to be worth their weight in gold."

"Tarsem and I finally signed a deal with Palmi on 24 November 2004 in the London flat of Arev’s John Scheving (like all the Icelanders we met, he had a swish flat in Chelsea overlooking Stamford Bridge). We would buy the Iceland business for a fixed £160 million. Best of all we negotiated to leave the pension deficit behind with Booker. We agreed to pay a further £20 million, phased over our first year in the business, to take us out of the BFG pension scheme altogether and make a fresh start. This was without doubt the best £20 million we have ever spent. We also managed to negotiate a shareholders’ agreement whereby no dividend could be paid or any refinancing take place without the consent of the management. We were frightened that Baugur might want to strip cash out of the business. Why they agreed to it I don’t know but they were pretty broad-brush in their approach and once the deal was agreed in principle they weren’t too interested in the detail, particularly where Iceland was concerned: they were focused on the big opportunities in the property portfolio and Booker. We also negotiated that if they ever wanted to sell the company we had the right to buy provided we could match the price. These conditions later proved to be worth their weight in gold."

"Jon Asgeir Johannesson of Baugur"

"It is easy to say with hindsight, of course, but to a degree I did see the same thing happening at Landsbanki. I couldn’t pinpoint one thing. But I was sceptical of the relationship with Baugur, to which it was lending way too much money. Baugur was effectively bankrupt by the end of 2007 and I had been saying for a long time that it was just taking too much risk. It kept buying up assets on UK high streets for a full price but never sold a single one. It was always buying, and then someone in the group would form a daughter group so that assets were often being passed on within the group for a higher price, creating virtual profit. There were a lot of what I would call ‘virtual transactions’. When I made this argument, people inside Landsbanki always said it was just rivalry between me and Baugur’s chairman, Jon Asgeir Johannesson. It wasn’t, but it took a long time for Baugur to unravel and for others to realise the truth. Johannesson was seen almost as a pied piper to Reykjavik’s financial community. Bankers and investors seemed to follow him everywhere and of course the fees were lucrative. I said to one of his bankers: ‘He pays you a lot of fees. He’s never going to try to push down the fees because he’s not interested. He’s just trying to borrow to the limit and then he’s going to say: “I’m too big to fail.”’"