It has been fascinating to see the response from national media outlets to the news that the Grant family is effectively transferring ownership of The Entertainer to the staff in the form of an Employee Ownership Trust. Some newspapers have pretty much conferred Sainthood on Gary: an article in The Daily Mirror suggested that posters should be put up across the country saying: “Be more like Gary.” The piece even went so far as to suggest that he should be given a seat in the Cabinet to advise Labour on how to incentivise other CEOs and millionaires to “do a Gary thing.” Clearly the author was a big fan of the initiative.
Not all journalists have been quite so generous in their assessment of the arrangement. A headline in The Times quoted Gary defending the move thus: “I’m giving up control of my toy empire – and it’s not a tax dodge.” Of course, it’s no secret that the business isn’t being “handed over,” there is a cost that will be payable to the Grant family out of future profits. Gary says that he chose a valuation at the lower end of the spectrum, to make it fair for all. And, of course, whatever value he will be extracting in future will not be liable to capital gains tax, saving a tidy sum. However, Gary has insisted that this wasn’t his primary rationale for choosing this approach. No-one can criticise anyone for fiscal efficiency, and everything here is fully above board. You could even argue that the Grants are taking more of a risk by selling to the employees. You rarely hear of Private Equity earn outs not being paid. These deals tend to be loaded with debt, designed to pay out no matter what impact this has on the long term prospects for the company. Personally, I choose to believe that altruism and a desire to preserve a valuable legacy are far more important to the Grants than the capital gains tax benefits associated with EOTs. Ultimately, I think it could reasonably be argued that passing the company over in this way was a good business decision, as well as a virtuous one.
Elsewhere on the retail front, I gather that Sarah Harding will shortly be joining the Argos toy buying team. Sarah has a long and distinguished history within the toy retail channel, so I am sure her knowledge and understanding of the toy market will be a valuable asset to Argos as it continues to grow back its share in toys – albeit, it must be said, from a relatively low base compared to its heyday. However, suppliers are telling me that they’re beginning to see green shoots, and that’s welcome news. Maybe Sainsbury’s will also look at boosting its toy buying team going forward – the fact that one person is handling the whole category must be a gargantuan task, no matter how good they are. Bolstering the (one man) team might also give suppliers a little more confidence that Sainsbury’s has genuine commitment to the toy category – and it would surely make good business sense to get toy suppliers onside.
While it’s the time of year when suppliers are trying every trick in the book to secure extra listings or encourage retailers to take more stock, it’s also important to be wary of criminals attempting to hoodwink legitimate toy companies.
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