Employee buyouts: a helping hand

The writer followed the fortunes of the Baxi co-operative for some years. Philip Baxendale, the owner of an old-established and greatly respected Lancashire firm, decided it should become a co-operative and it prospered greatly for years. However, in November 2000 there was a ‘forced sell-out’ and its manufacturing operations now continue as a conventional company under the name Baxi Fires Division (BDF), supplying five brands including Baxi and Valor.

The Baxi Partnership Ltd was left with £20m in 2000, placed in trust for its employees, set up by Act of Parliament and mandated to invest in employee buyouts.

The Sunday Times records that since it started in 2002 it has financed several employee buyouts, including UBH International, a Lanca­shire firm that makes container tanks, and Woolard & Henry, a 125-year-old Aberdeen engi­neering business.

Founder Philip Baxendale – pictured with leadership award winner Louise Smith of Stewartry Care

With each investment, Baxi takes half the equity in the com­pany and the other 50% is retained by the employees. The Baxi shares are held in trust for the benefit of the employees and the shares held by employees can be traded in the normal way.

David Erdal 

Baxi’s non-executive director David Erdal studied worker co-operatives and did his thesis on three towns in Italy which had several. He found that there was less crime, that the workers were healthier, and that education and social partici­pation was far better where there was worker participation in the business.

In April this year, in a Financial Times article about his latest book about employee ownership, Beyond the Corporation: Humanity Working, Mr Erdal explains that he also talked to Philip Baxendale, the architect of the Baxi buy-out and became convinced that this was the way forward for his family firm Tullis Russell.

In 1985 he introduced a profit-sharing share scheme that bought shares from family shareholders and passed them on to employees who had been with the company for more than a year. The next step was to set up an Employee Benefit Trust, which bought a block of some 15% of the shares for the employees. By 1994 all the family shares had been acquired and the employee buy-out was complete.

John  Alexander

Below, in the January 2010 ICOF Newsletter, managing director John Alexander records the increasing success of the trust’s work and welcomes the building of a fruitful relationship with Co-operative and Community Finance – which has its own heartwarming story to relate, another time.

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