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oo 11:03 DTI SECRETARY OF STATE OFFICE He. G48. P.23
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Chairman
148 Old Street
23 May 1999 LONDON
The Rt Hon Stephen Byers MP
Secretary of State .
Department Trade & Industry TI
1 Victoria Street to: Mr Si bb CORRS
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In the light of your letter today expressing the Government’s wish for the Post
Office to sign the Heads of Agreement with ICL, the Post Office Board met
tonight. With the exception of one non-executive, all members were involved.
We considered your proposal and the unanimous view of the Board was as
follows:
@ based on the information currently available to us, and bearing in
mind our fiduciary responsibilities, we believe that option B3 is likely
to lead to a deterioration in the financial position of the Post Office,
and is not the best use of shareholder funds
® however, you have made it clear that you and colleagues believe it is
the best way forward, and of course.we do have the opportunity of the
next three months to fully understand the proposal and see if it can be
made workable
1999 11:03 DTI SECRETAR'
STATE OFFICE 1H, G4
PRIVATE & CONFIDENTIAL
@ in the light of this we would be prepared to sign the Heads of
Agreement tonight but on the following conditions:
- while we will work positively to create a success of the
option, if the three months show this is not possible, or the
performance of ICL causes us to doubt further their ability
to complete their part of the deal, then we expect the
£150m cancellation payment to be treated in the same way
as the £480m.
- _ in the case of both figures they will lead to appropriate
profit target and EFL reductions and that you will ensure
payment is made in a way that POCL remains solvent and
able to pay its creditors as they fall due.
- that none of the figures mentioned in your letter will in any
way affect the proposals, including funding for
Xe acquisitions so far put forward in the Government
approach to the White Paper.
- that because POCL is largely exempt from VAT, you will
ensure that the VAT effects on the payments to ICL are
neutral to the Post Office.
Finally, my Board are deeply concerned about the whole way in which this
issue has been handled and about the relationship between yourself as our
sponsoring Minister and ourselves, I would like an urgent meeting between
myself, the non-executives and yourself as soon as possible.
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