Home news McColl's founder lined up for P&H rescue deal

McColl's founder lined up for P&H rescue deal

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A co-founder of McColl’s, the convenience store chain, is being lined up for a key role in a rescue deal aimed at salvaging the future of Palmer & Harvey (P&H), the grocery wholesaler.

Sky News has learnt that James Lancaster, who helped to launch McColl’s in 1973 and still sits on its board, has been invited by the buyout firm Carlyle to join P&H as its non-executive chairman as a takeover draws closer.

Sources said that Carlyle and P&H were on the brink of signing an exclusivity agreement on Tuesday, with an announcement likely to be made later this week.
An agreement leading to a takeover of P&H would come as a relief to the 4,000 workers who have endured an anxious six months amid uncertainty about the financial health of their employer.
The purchase of P&H by Carlyle is still likely to take several weeks to conclude, according to insiders, but is expected to involve the private equity group paying a nominal sum to take a controlling stake.
It is also likely to involve Tesco, which has a contract for P&H to supply all of its British stores with tobacco products, agreeing to an extension of existing deal to as long as five years.
The wholesale sector has been plunged into a state of uncertainty by Tesco’s audacious £3.7bn takeover of Booker, which has sparked a probe by competition regulators.
As well as Carlyle, Sainsbury’s has explored a bid for P&H, as has Brookfield Business Partners, owner of the road-fuel distributor Greenergy.
Sainsbury’s has also terminated exclusive discussions to buy Nisa Retail, a convenience store wholesaler and retailer, which is now the subject of interest from the Co-op Group.
P&H is the biggest tobacco distributor in Britain, supplying roughly 90,000 retail outlets across Britain with cigarettes, confectionery and other grocery products.

As part of the prospective deal with Carlyle, Imperial Brands and Japan Tobacco International (JTI), two of the world’s biggest cigarette manufacturers, are expected to roll over roughly £60m of outstanding loans to P&H.
The precarious finances of P&H have caused alarm at some of the UK’s largest retailers and tobacco groups because of the integral role it plays in their supply chains.
Lenders to the company, which include Barclays and Royal Bank of Scotland, had also become increasingly anxious about the potential ramifications of the Booker takeover.
An earlier refinancing of the delivered wholesaler was only concluded a few months ago, alongside an 18-month extension to its supply agreement with Tesco, which accounts for roughly 40% of P&H’s revenues.
P&H is one of the UK’s biggest private companies by sales, and among the largest to be owned by current and former employees.
The existing shareholders are unlikely to receive anything other than a modest payment for their interests in P&H, which was established in 1925 as a tobacco and sweets wholesaler.
The company is run by Tony Reed, a former boss of Tesco’s convenience retailing business, who is thought to be likely to remain in place if the Carlyle deal is finalised.
P&H and Carlyle declined to comment on Tuesday.

Source: SKY