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Five-year tie-in may obstruct SSP sale

26 January 2006
Five-year tie-in may obstruct SSP sale

Compass Group's sale of its travel concession business SSP may have hit a stumbling block over a supply clause in the deal.

As part of the £1.4b package, the new owner will be tied into a five-year purchasing agreement with Servita, Compass's Swiss-based centralised food supply business.

It has left some involved in the process questioning the implications. "It could be a stumbling block if prices went up over the five years," said one source close to the deal.

The source added that the five prospective buyers might have concerns about the issue of purchasing transparency after recent reports that the group withheld bulk discounts from a cleaning product manufacturer.

Diana Spellman, managing director of purchasing consultancy Partners in Purchasing, believes the Servita tie-in could be beneficial, given Compass's purchasing muscle, but warned potential buyers "to do some extremely detailed due diligence" to ensure it was a favourable move.

A Compass spokesman said: "This has been clearly laid out from the start and hasn't just been thrown at the bidders.

"It is something that has been done successfully in past sales."

The three private equity bidders still believed to be in the frame are Terra Firma, Texas Pacific and Blackstone. Italian roadside group
Autogrill and French caterer Elior are also still in the running.

An industry source said they believed Autogrill was the frontrunner because of its good geographical fit with SSP.

By Tom Bill

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