Derby on the defensive

[Uploaded to BikeBiz.co.uk on 23rd September]

Had Derby not sold the factory site of Sturmey Archer to the University of Nottingham there would be no re-location costs and hence no need to offload the company to save money.

And Lenark would never have crawled out of the woodwork.

Thats why Sturmey Archer employees feel Derby sold them down the river.

Gary Matthews, the US-based MD of the Derby Cycle Corporation, is having none of that. Below youll find Derbys official press release but first theres an interview Carlton Reid of BikeBiz conducted with Matthews on Thursday night.

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Telephone interview with Gary Matthews, MD, Derby Cycle Corporation

[Transcript taken from notes not a tape recording.]

CR: Whats your reading of the Sturmey Archer collapse

GM: We dont know much from an official standpoint. Our information is that theyve been put into liquidation.

CR: What checks did you make on Lenark before the sale went through?

GM: We did a comprehensive review of Lenark. We were confident they were a reasonable investment house. We had no inkling any malfeasance would go on.

CR: Did your legal advisers Wragge & Co of Birmingham do any due diligence reports on Lenark?

GM: I dont know where youre getting your information from. Who our advisors were is not material. Were not going to comment.

CR: If they didnt warn you against Lenark would you consider taking action against them?

GM: Not going to comment.

CR: What evidence did Lenark provide that they were good for taking on a committment of £5m?

GM: They gave us evidence of plenty of resources.

CR: Were some of those resources the reputed millions of Lenark director Barry Robinson, a self-styled professional gambler based in Las Vegas?

GM: Were not going to comment about Barry Robinson. Talk to him.

CR: Who negotiated the deal for Lenark?

GM: Barry Robinson and Clive Walton.

CR: I believe there were other offers on the table at the same time of the Lenark offer

GM: Thats correct.

CR: Were the other companies from the bike trade?

GM: Thats not relevant.

CR: Were all the offers for the whole of Sturmey or were some cherrypicking?

GM: It was always for the compary in its entireity.

CR: Why did you want to sell Sturmey?

GM: Sturmey Archer was non-core to Derby. Were committed to the bicycle business. Sturmey Archer was the only component manufacturer we had. Were a $600m business, Sturmey Archer is just $15m and was under-performing. Our objective was to sell it so it would continue operations, bought by somebody who could give it more attention than we could give it. We had a business plan for Sturmey Archer.

CR: But Gazelle is a big user of Sturmey Archer, it would make sense to own a major group supplier

Yes, we are a big customer of [Sturmey Archers]. Look, youve got to understand Lenark was breaking ground at the new factory, we thought everything was being done that was in our business plan for Sturmey Archer.

CR: Will Derby rescue it?

GM: No decisions yet. Were still studying the situation.

CR: Why was cash withdrawn from Sturmey Archer the day before the sale. Why leave Sturmey Archer in neutral cash-flow?

GM: Details of the deal were not made public. Im not giving you information where that is concerned. Whats your angle here?

CR: No angle, I just have a list of questions to ask.

GM: Last question I have a call waiting.

CR: I have a load more questions but anyway Chase Manhattan bank did the deal where 20 or so financial institutions each put in their share of junk bunds to finance the $300m purchase of Derby by Thayer a couple of years back…

GM: Yes. But the acquisation price was nowhere near $300m. There were a variety of forms of financing the deal. Right Ive got to go.

DERBY PRESS RELEASE

22nd September 2000

STURMEY-ARCHER

In connection with our sale of Sturmey-Archer to Lenark in June of this year there has been much rumour and public comment generated. We share this disappointment and would like to share what we know.

We decided to seek a buyer for the business as it did not fit our strategic focus on the manufacture and distribution of bicycles and accessories.

It was essential for the viability of the business that a buyer be found without delay who was willing to invest in the patented innovation which Sturmey-Archer had prototyped and to relocate to a new site: the best offer was made by Lenark.

In carrying out due diligence on the capability of Lenark to make a success of Sturmey-Archer, evidence was produced showing that they appeared to have more than sufficient resources to undertake the plans the management of Sturmey-Archer had initiated to make a success of the business.

We were just as surprised and concerned as anyone that it now appears that Lenark is unable to fund Sturmey-Archer, and this has forced it to enter into insolvency proceedings: we are both a customer and creditor and will suffer from their insolvency along with others in the same position.

We understand that an insolvency practitioner has been appointed by the management of Sturmey-Archer to advise them through this period until a meeting of creditors next month determines the future of the business: we sincerely hope that a buyer for the business can be found.

We are very distressed that so many Sturmey-Archer employees who served loyally for many years under our ownership of the business will lose their jobs if a buyer cannot be found.