Goldman Says It Warned Former BHS Owner About Suitor’s Finances

  • Parliament investigates collapse of department-store chain
  • U.K. buyout group lacked retail experience, Goldman says

Goldman Sachs Group Inc. said it warned the former owner of collapsed U.K. retailer BHS that the investor who later acquired the department-store chain had a history of bankruptcy, as the iconic company’s breakdown and possible job cuts come under public scrutiny.

Anthony Gutman, co-head of European investment banking at Goldman Sachs, said during testimony in Parliament on Monday that he made “observations” to BHS owner Arcadia Group Plc in 2014 in an unpaid capacity, telling the retailer about the suitor’s financial history and lack of retail experience.

Goldman Sachs provided the advice as Arcadia was discussing the sale of BHS to Retail Acquisitions, a buyout group controlled by Dominic Chappell, a former race-car driver. Retail Acquisitions bought BHS for 1 pound ($1.45) last year.

BHS, a fixture of the U.K.’s downtown shopping streets that sells everything from clothing to lighting, last month was placed under administration, similar to Chapter 11 bankruptcy protection in the U.S. The collapse has caused a public outcry in the U.K., putting 11,000 jobs at risk and raising the prospect of cuts to workers’ retirement income because of a 571 million-pound shortfall in BHS’s pension fund.

Scrutinizing Sale

U.K. lawmakers are scrutinizing what Arcadia and its majority owner, Sir Philip Green, knew about Mr. Chappell at the time of the deal. Green is set to appear before lawmakers next month.

Goldman acted in an informal advisory capacity to Arcadia during the BHS sale process, but declined an official role in the talks because the transaction was too small, Gutman said.

Paul Budge, Arcadia’s finance director, said executives were aware that Chappell had previously filed for bankruptcy. Arcadia “took that on board,” he said.

“This was not one man on his own,” Budge said. “He had a good team.”

Duff & Phelps Corp., which is overseeing the administration proceedings, is trying to find a buyer for BHS.

Before it's here, it's on the Bloomberg Terminal.