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Monday, September 20, 1999 Published at 16:56 GMT 17:56 UK

Business: The Company File

John Lewis rules out float

Legal safeguards protect store's long tradition of trust status

UK retail group John Lewis has ruled out a sale of the business, as the group said its central council was overwhelmingly opposed to floating the company.

"There was overwhelming support for the continuation of the Partnership's unique democratic structure," the group said in a statement following a debate on the subject.

The central council of UK retail group John Lewis met Monday to discuss the demand by a staff member to float the company on the stock market - generating huge windfall payments to the firm's 40,000 staff - and the board's decision not to hold a referendum on the issue.

Following the meeting, the group said that about 40 of the councillors spoke "and not one called for demutualisation of the partnership and only one supported a call for referendum."

John Lewis Partnership is owned by a trust which is obliged to operate in the best interests of present and future staff.

[ image: John Lewis Partnership includes Waitrose supermarket chain]
John Lewis Partnership includes Waitrose supermarket chain
For this reason, the leading law firm, Linklaters, says employees are very unlikely to be able to force the group to float, according to a report in the Financial Times.

Victoria Love, a trusts expert at Linklaters, says there are formidable legal barriers to a change of status.

"Even if all the current employees agreed that they wanted the trustee to act in a particular way, they would not be entitled to compel the trustee to do so," she said.

If employees favouring the sell-off went to the High Court to vary the trust, the court would approve changes only in the interests of all beneficiaries - future and present. Paying out all the assets to the present employees hardly passes this test.

Proud history

The 25 department stores of the 135-year-old John Lewis Partnership span the nation from Southampton to Aberdeen and are well-known for their comprehensive range of competitively priced goods - and the motto "Never knowingly undersold".

The group says: "If we find a local retailer selling the same goods at a better price, we will reduce ours to match it - even if their goods are in a sale.

"If you buy goods from John Lewis and then see them for a better price elsewhere, we will refund the difference. We employ people who do nothing but monitor our competitors' prices to make sure we remain competitive.

"Partners are paid a £2 bonus if they spot the same product cheaper elsewhere. We have been 'never knowingly undersold'  for more than 60 years."

The group ranges from buttons to beds and pencils to personal computers, and through its Waitrose stores also high-quality supermarket fare. It even offers extra-small baby clothes for those born prematurely.

The impetus for a flotation has been the prospect of windfalls estimated at up to £100,000 per employee. But the unique attributes of the group are tied in to the way it is structured.

For example, John Lewis shops are proud of a long tradition of the highest levels of customer service, and many customers would be concerned that any sell-off could result in a drop in standards.

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