Terra Firma Boss Beds Down With Malmaison Bid

By Mark Kleinman, City Editor

The buyout tycoon Guy Hands is circling two of the UK's best-known hotel chains in what would represent a rare UK investment since his high-profile ownership of EMI came to an ignominious end.

Sky News has learnt that Terra Firma Capital Partners, Mr Hands' private equity firm, is one of about three remaining bidders for Malmaison Group, which has been put up for sale for more than £350m.

If Terra Firma clinches a deal, it would represent a rare investment in a UK company since Mr Hands surrendered control of EMI, the record label, after it ran into financial trouble in 2010.

Mr Hands, who has been one of the UK's most prominent private equity investors during the last two decades, launched a lengthy legal battle over the fate of EMI, with the latest phase scheduled to reach court later this year.

Terra Firma's portfolio now includes Four Seasons, a healthcare group, Odeon Cinemas and Wyevale Garden Centres, with at least two of those businesses likely to be sold in the next 18 months.

The tycoon's copybook was blotted by his decision to buy EMI almost a decade ago, although he has pointed out that Terra Firma's other funds have returned handsome sums to their investors.

If Mr Hands' bid for Malmaison, which also owns the more upmarket chain Hotel du Vin, is successful, it would pit him in opposition to his wife Julia, who runs the boutique group Hand Picked Hotels.

Guy Hands, whose private equity firm Terra Firma wants Malmaison

KSL Capital Partners, which acquired Malmaison Group in 2012, has decided to sell the business, with an auction being run by advisers at the investment bank UBS.

Among Terra Firma's rival bidders is TDR Capital, the private equity group which owns David Lloyd Leisure.

Malmaison's sale comes just two years after its former parent collapsed.

Hotel du Vin and Malmaison, which trade from nearly 30 sites across the UK, were previously owned by MWB Group, which fell into administration in November 2012.

Employing approximately 3,000 people, Malmaison recently acquired the historic Cannizaro House in southwest London, and will invest £1m in renovating the property before reopening it under the Hotel du Vin brand.

Other sites, including Great Scotland Yard in central London, are also in the process of being acquired, underlining the growth ambitions of the company's management team.

Hotel du Vin and Malmaison have become prominent players in the hospitality sector, specialising in converting well-known local landmarks such as a former castle prison, hospital and sugar refinery, into boutique hotels.

KSL, which also owns The Belfry, one of the UK's leading golf courses, is also participating in a consortium which wants to buy Center Parcs, the holiday resorts operator.

Terra Firma declined to comment on Monday.

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City Link Backer Warns Over Company Rescues

By Mark Kleinman, City Editor

One of Britain's most prominent investors has warned that more struggling companies will go bust because of the political opprobrium triggered by the collapse of parcel delivery operator City Link.

Speaking to Sky News, Jon Moulton, the head of Better Capital, said the fallout since City Link went into administration on Christmas Eve meant the reputational risks of trying to salvage consumer-facing businesses would make him less likely to approve an investment when similar opportunities arose.

"We did everything we could to save the company," he said.

"The turnaround profession is already quite small, and the net result of this is likely to be that there will be fewer attempts to rescue companies and therefore that more companies will fail."

Mr Moulton was speaking as MPs on the Scottish Affairs and Business, Innovation and Skills (BIS) select committees published a report which accused City Link of breaking the law by failing to offer sufficient notice of redundancies in the period before it collapsed.

Thousands of jobs were shed as the perennially loss-making courier firm failed to overcome intense competition and pricing pressure, which were already in evidence when Rentokil offloaded City Link to Better Capital for a token sum in 2013.

One of the UK's most active investors in corporate turnarounds, Better Capital lost an estimated £20m on its investment in City Link.

A source close to the firm said that the likely alternative to its acquisition of City Link would have been for it to have fallen into administration much sooner, meaning that the Treasury would not have received millions of pounds in subsequent payroll and other taxes.

Mr Moulton backed MPs' call for an overhaul of insolvency laws, saying that the German system which enables companies' liabilities to be frozen for a three-month 'standstill' period could offer a better model for the UK.

The MPs' report said: "While there were differences of opinion as to whether or not City Link could be made viable, and the desired level of return could be achieved, the Committees regret that Better Capital felt its investors' interests could only be protected at the expense of the future of City Link and continued employment for its workers."

Ian Davidson, chairman of the Scottish Affairs Committee, said: "The rules on insolvency, on everything from how and when information is shared with employees, to the order in which creditors are paid out, are skewed too far to the advantage of investors, directors and management.

"Further, the system provides perverse incentives to withhold information or to skip proper consultation processes in contravention of the law and at a high cost to workers struggling to cope with the loss of their livelihoods.

"It also creates incentives to use cheap, insecure forms of employment, such as bogus self-employment, which gives a worker all the responsibilities of an employee but none of their rights or protections".

Adrian Bailey, chairman of the Business Committee, added: "It is deeply regrettable that Better Capital felt its investors' interests would be better served by abandoning City Link and its workers.

"Contractors, suppliers, and workers were left high and dry - taking a serious financial hit - and are now left to struggle on in the wake of the decisions of Better Capital".

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First Plastic Fiver In Britain In Circulation

A new limited edition £5 note has been launched - the first in Britain to be made from plastic as paper banknotes start to be phased out.

The note was commissioned by Clydesdale Bank and is available, initially, from its branches only.

The fiver is the first fully polymer banknote to enter circulation in Great Britain, following in the footsteps of Northern Bank of Northern Ireland, which issued a £5 polymer note to commemorate the year 2000.

The Bank of England is due to begin introducing polymer £5 and £10 notes next year.

They are designed to boost durability and combat fraud.

It is estimated that a polymer note will last 2.5 times longer than a traditional cotton paper version but it will remain vulnerable to extreme heat.

New Bank of England notes are due in a year's time

Clydesdale said its two million notes were being launched to coincide with the 125th anniversary of the opening of the Forth Bridge.

It also features a portrait of prominent Scottish engineer Sir William Arrol, whose company oversaw the construction and other famous Scottish landmarks including the giant Titan Crane in Clydebank.

The new £5 note, which is smaller than existing notes of that denomination, has been designed by De La Rue.

Clydesdale is among three Scottish banks which have the power to introduce their own notes.

In terms of innovation, the bank said: "In a first for UK currency, the note will include a Spark Orbital security feature.

"This appears as shiny ink in the shape of Scotland over a transparent window which changes colour as the note is moved and tilted."

Debbie Crosbie, acting chief executive of Clydesdale, added: "Our new polymer notes are more durable and secure, which will deliver a positive impact for the public and businesses."

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McDonalds Boss Takes A Ride To Halfords

The boss of McDonalds UK has been poached to become the new chief executive of Halfords.

Jill McDonald, who was also president of the fast food chain's North West Division, had run the UK business since 2010 and is set to replace Matt Davies, who has been lured to run Tesco's UK operatons.

Halfords said she would be paid £500,000 basic pay, plus a maximum annual bonus worth 150% of her salary.

She will also be entitled to participate in a performance share plan worth up to 150% of salary and will be compensated for the loss of long-term share incentives at McDonald's by being granted stock worth £495,000 over the next three years.

Her appointment was a surprise given the major European role she is leaving behind, which took in responsibility for the company's biggest European market, Germany, and seven other nations including the UK.

The division comprised of 3,300 owned and franchise restaurants, employing 200,000 people.

She said today: "Halfords is a business and brand that resonates with me and the UK public and I am delighted to be joining the company".

Halfords chairman Dennis Millard said: "When the board began a search for a new CEO we were clear that we were looking for an outstanding business leader.

"We are delighted to have recruited Jill, who has a strong track record of heading a large, complex, service-led business with great success".

Ms McDonald joined McDonald's in 2006 from British Airways.

Halfords, which has a network of stores and vehicle service centres across the UK and Ireland, has benefited from the surge of interest in bikes since the London 2012 Olympics.

Its latest half-year results showed underlying profits grew 10.8% to £49.4m in the six months to 26 September.

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UKIP Pledges £3bn Extra In Defence Spending

UKIP leader Nigel Farage has announced plans to increase national defence spending by more than £3bn a year if he is successful at the General Election.

He accused other parties of being dishonest about how they plan to make savings, and said he would reallocate money currently being spent on the European Union and on foreign aid.

Mr Farage also pledged to reduce UK taxpayer spending in Scotland and to scrap the High Speed 2 rail project.

UKIP said the money saved would be used to get rid of inheritance tax and raise the 40% personal allowance, as well as eliminating the deficit.

Mr Farage said the main parties had displayed a "complete, total lack of honesty" about the public finances, with the deficit running at £90bn per year and a national debt of £1.5tr.

Video: Nigel Farage 'Deeply Shocked'

The upturn in the economy was a "London-led and an asset-led" recovery that is not being felt in the rest of the country, he claimed.

Mr Farage said: "It's quite difficult to believe any plan that you get from the other parties about what public spending might be, on the health service, on education, on anything else, when they don't know because of open door migration, within the nearest couple of million, how many people will be living here in five years' time."

He described the party's economic policies as "pragmatic" and claimed UKIP has got its "feet on the ground".

Mr Farage added: "It is vital that over the next Parliament, yes we need more growth in the economy, but we've got to control and cut in some areas government spending, we've got to get rid of that deficit, or we are handing on to our children and grandchildren an economic millstone around their necks."

Video: Tory Veteran Dismisses UKIP

Mr Farage was speaking at a sheet metal manufacturing firm in Middleton, Greater Manchester, to outline the party's plans for the economy.

UKIP's economics spokesman Patrick O'Flynn told the event: "It is astonishing to think that UKIP goes into this election as the only party offering the British people a policy of meeting the NATO requirement of 2% of GDP being spent on defence.

"It is equally astonishing to behold three other so-called mainstream parties, and in particular the Conservative Party, eagerly chaining themselves to a GDP target for foreign aid giveaways while grievously neglecting the first duty of government; defence of the realm.

"Over the course of the next parliament, our public spending plans will allow for cumulative extra spending on defence of more than £16bn compared to Government spending plans."

Video: Farage: Tories Debate 'Hokey Cokey'

Mr O'Flynn said UKIP would give employers the right to discriminate in favour of British jobseekers, something which saw "all hell break loose" when suggested by Mr Farage recently.

The event comes as the party tries to get its election campaign back on track after a number of controversies.

The fate of MEP and parliamentary candidate Janice Atkinson is expected to be decided by a disciplinary panel later.

Her chief of staff was filmed apparently asking for an inflated invoice to claim on European expenses.

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1. Gallery: Farage Race Row Twitter Spat

   The Prime Minister accused Mr Farage of "attention seeking"

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Boeing Patents Star Wars-Style Force Fields

By Sky News US Team

Boeing has obtained a patent for Star Wars-style "force field" technology designed to protect military vehicles and other potential targets from shockwaves from explosions.

The design is named "Method and system for shockwave attenuation via electromagnetic arc" and uses energy to deflect potential damage.

According to patent office website USPTO, the technique is a shockwave attenuation system consisting of two elements: a sensor to detect a shockwave-producing explosion, and an arc generator that receives a signal from the sensor and uses energy to deflect the effects of the explosion.

A design that accompanies the patent on the patent website. Pic: USPTO

"Such embodiments ... may reduce the energy density of the shockwave by creating a second medium in the path of the advancing shockwave that reflects, refracts, absorbs and deflects at least a portion of the shockwave," the patent reads.

The futuristic defence system will not deflect direct hits.

Something similar has been seen in several sci-fi movies, from Star Wars to Fantastic Four, where it is used by character Sue Storm.

The patent was first filed in May 2012, and was granted this month to Boeing, which produces aircraft, satellites, rockets and military vehicles.

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Merkel And Greek PM Seek To Repair Relations

The prime minister of debt-ridden Greece is to visit Germany for the first time since his election, as relations between the two countries deteriorate.

Alexis Tsipras will meet chancellor Angela Merkel in Berlin, with both aiming to cool tensions surrounding the Greek funding crisis.

Germany has been the most vocal creditor to insist the country sticks to its reform programme in return for continued bailout cash.

Its tough stance has infuriated the Greek side, elected on an anti-austerity ticket, which threatened to seek extended wartime reparations from Germany as diplomacy eroded earlier this month.

Greece, which needs all the money it can get to cover a national debt of more than €320bn, cited war crimes and a loan that occupied Greece was forced to make to the Nazis.

Video: Greek Rescue Package Explained

The German newspaper Bild has also reported that Greece's government is seeking more than €100m in compensation from German defence companies over alleged arms deal fraud.

In Germany, such demands have angered a public which has remained sceptical of the funds already contributed to the rescue of the Greek economy at the height of the eurozone's debt crisis.

As things stand, Greece's international creditors - the EU, European Central Bank (ECB) and the International Monetary Fund (IMF) - have urged Athens to come up soon with budget cuts and tax increases that would enable it to access more bailout money.

Greece fears running out of cash by the end of April unless it secures access to its bailout extension.

It is due to receive another €7.2bn (£5.1bn) if its delayed reform plans meet creditor approval.

Video: Warning: Purported Rude Gesture

The country's finance minister, Yanis Varoufakis, announced on Monday he had cancelled planned speaking events in London on Tuesday as he worked towards finalising the proposals, which are expected to be submitted next week.

Merkel has insisted Monday's meeting "is not the place for any lists with proposed reforms to be submitted".

She said those were a matter for the creditor bodies not Germany itself.

The two countries' foreign ministers met on Sunday night and agreed to work on strengthening general relations.

However, that aim could prove difficult given frustration with Greece, particularly over its demands for wartime compensation.

The parliamentary chief whip of Merkel's conservatives, Michael Grosse-Broemer, described them as "another distraction from Greece to divert attention from their own failings".

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Osborne: From Statesmanlike To Disingenuous

You didn't have to look too far for the main message George Osborne was trying to get across in this session.

"Let's not think the problems are over - the job isn't finished" and "lots done but still more to do" were among the soundbites best summing up the Chancellor's position.

He sought, at almost every turn, to emphasise that, while the UK economy is recovering, the recovery is not yet secured.

The subliminal message underpinning that? "It's not yet safe for you to start voting Labour again."

His other message was that this is a government trying to think ahead and plan for the long-term rather than coming up with short-term sticking plaster solutions.

That was very evident in the answers he gave to questions on the current failings of the business rates system and in response to a demand for VAT to be cut on tourism.

It was here that Mr Osborne was at his most statesmanlike.

Asked why a cut on VAT for tourism was not appropriate, he replied that the £10bn cost would be too much, that other countries to have tried it had not enjoyed the boost they had expected and that tourism would benefit more from the improvements he was making to the A303 and the rail link to the West Country.

"I think that is a better investment for the South West and the tourism industry in the South West … I do know in five, six, seven years' time it will make a massive difference to people and businesses in the South West," he said.

Not much there for the people who run tourism in the Lake District, the Peaks or the Norfolk Broads, but you take his point.

The Chancellor was in equally long-termist mode where he discussed the perennial problem of business rates, pointing to the Government's recent promise of a complete overhaul of the system, while pointing out he could not just abolish the system because it raises £20bn for the Exchequer each year.

And some questions were an open goal for him.

There was one particular question about "old people still dying because they can't afford to heat their own homes" - something that has plainly not happened during the last winter - which enabled Mr Osborne to talk at length on the outrageous generosity this government has shown to pensioners and the stupendously generous bungs he has handed them while hacking away at the benefits paid to people of working age.

He was also on reasonably solid ground in questions on Europe and international trade and, when asked about housebuilding, the need to tackle Britain's sclerotic planning laws.

In this section, one could argue, the Chancellor actually underplayed one of his better cards  - Help to Buy has undoubtedly revived the housing sector - as he also did when, asked about zero hours contracts, he only belatedly brought up this Government's single strongest achievement, namely, the creation of 1,000 jobs every day of this Parliament.

In other areas, Mr Osborne was less convincing.

Tackled about the apparent unwillingness of the banks to lend to small business, the Chancellor waffled "I completely agree with you", which was disingenuous given that he effectively controls Royal Bank of Scotland and, for most of his time as Chancellor, could have exerted strong influence on both it and Lloyds Banking Group.

He was similarly disingenuous when, asked about zero hours contracts, he merely insisted that the best thing he could do was create more full-time jobs where it pays to work and claimed it was not possible to outlaw zero hours contracts "by passing a law".

Really? Surely that is precisely what governments do if they disagree with something.

There were other areas where it would have been good to have seen the Chancellor pressed harder.

Having offered a stout defence of an independent Bank of England, someone might have come back to him, noting that the Chancellor sets the mandate for the Bank via the inflation target.

Similarly, while he trumpeted the recent tax cut for savers in his budget, nowhere was it noted that virtually nobody will have sufficient savings to earn £1,000 in interest.

And the major elephant in the room was the policy that Mr Osborne made his key target at the outset of this Parliament - to eliminate the deficit.

It was surprising that no-one tried to tackle him on this because, palpably, it has been this government's biggest single failure.

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Osborne: We Want To Be In Europe, Not Run By It

The Chancellor has insisted Britain should be "in Europe, but not run by Europe" as he set out his vision for the UK economy.

George Osborne dismissed the idea firms were being put off investing in the UK because David Cameron had promised a referendum on Britain's membership of the EU.

He said: "We are getting more investment than any other EU country."

But he added it was essential there was EU reform, saying:  "We've got to make sure the whole of Europe, Britain included, reforms ... Our view, which is we want to be in Europe but not run by Europe, is where I think the majority of British people are, and the majority of British businesses are.

"And we want a better deal for the whole of Europe. We should not be happy with the fact there are so many unemployed young people across our continent ... we also want a better deal for Britain.

Video: Projections: Sky News Poll of Polls

"We're not in the euro. We need a proper relationship with the members who are in the euro, and that's what we intend to achieve."

Mr Osborne was answering questions at Sky News' Ask The Chancellors event at Facebook's central London offices.

He said the economy had "had a heart attack" and the coalition had managed to get it back on track and was ready to "finish the job".

He admitted more homes need to be built to help young people get on the housing ladder - but said the Government had introduced a number of measures to help first-time buyers.

"The reason why the housing market stopped building things is because the economy fell off a cliff," he said.

Mr Osborne said there was "no silver bullet" to solve the problem, but there were measures the Government had announced at last week's Budget, including Help To Buy schemes and an ISA aimed at helping young people save for a deposit.

Video: Osborne On Housing Demand

He said: "I'm absolutely passionate about people having homes to buy and to rent for themselves."

While Mr Osborne admitted savers had got a bad deal out of historically low interest rates, he said: "I don't think increasing interest rates just to help savers would help the rest of the economy."

He was also quizzed about zero-hour contracts, and said they have been "abused" by employers.

"I think the biggest abuse you get is exclusivity," he said.

"So someone is on a zero-hours contract, but their company will not let them work for any other company, even though they're not guaranteed any hours of work.

"So a law has now gone through Parliament, which we've introduced, to stop that happening."

Video: The Chancellor On Business Rates

The Chancellor was asked questions by an audience of key opinion formers, including entrepreneurs and small business owners.

His Labour counterpart Ed Balls has also faced questions from the same audience this afternoon.

The event follows on from similar question and answer sessions for party leaders including David Cameron and Ed Miliband.

The clash comes at a crucial time, with the latest Sky News projection of seat numbers suggesting the two main parties are well short of the 326 seats they need for an overall majority.

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Ed Balls: Mansion Tax Will Save The NHS

Ed Balls has defended his party's plans for a mansion tax saying people with the "broadest shoulders" should be asked to pay their fair share "so we can save the NHS."

The shadow chancellor said many of the high value properties were owned by international investors and that provision had been made in the plans to make sure those who had low incomes but had benefited from house price rises were not unfairly penalised.

He said the measure was absolutely necessary at a time when the health service was going backwards because of under-funding.

Mr Balls said he was committed to staying in the EU and that Britain could be influential in Europe and change the way things were working.

He said that having a referendum on the EU and leaving within five years would be a "disaster" and that it was a "really, really risky for our country".

Video: Projections: Sky News Poll of Polls

Mr Balls said the UK did not need to be a part of the Euro to be influential in Europe and that a Government could not be playing politics with Britain's membership.

On the subject of house building Mr Balls said Labour did not build enough homes when it was in power but instead concentrated on repairing dilapidated housing.

He said the Labour party now was to build 200,000 more homes by 2020, adding it was a tough target but he believed they could deliver. 

He said: "Unless you get the supply of houses up ... it's going to be very hard for people to buy."

The shadow chancellor was accused of "tinkering around the edges" when it came to reducing the deficit and asked "when are you going to do the big stuff?"

He said Labour would have a "more careful and balanced plan" to reduce the deficit and that there were plans to put the top rate of income tax back up to 50p.

Mr Balls was answering questions at Sky News' Ask The Chancellors event at Facebook's London offices.

George Osborne faced questions from the same audience earlier.

Driving home the Conservative message to voters to stay on the right track, the Chancellor said his job turning round the economy was "not yet finished" and there was more to be done.

The event follows on from similar question and answer sessions for party leaders including David Cameron and Ed Miliband.

The clash comes at a crucial time, with the latest Sky News projection of seat numbers in the House of Commons suggesting both main parties are well short of the 326 seats they need for an overall majority.

Ahead of the showdown, political insiders revealed Mr Osborne and Mr Balls "get on" well, despite their very public political clashes.

Conservative activist and commentator Tim Montgomerie told Sky News that the men have a "good private relationship", while Damian McBride, who once worked with Mr Balls in the Treasury, said they like each other on a "personal level".

Mr McBride revealed the two men's private relationship to the Murnaghan show. He later added that there was common ground because both men have so many interests and hobbies outside of politics.

He said: "It is very rare that you meet politicians with so many outside interests that don't want to talk about politics all the time. (Ed Balls) would rather be talking about football or the theatre or what he watched on TV last night so he is that kind of personality and I think that is why he gets on with George Osborne."

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