Home news Carlyle lights up race for tobacco giant P&H

Carlyle lights up race for tobacco giant P&H

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A buyout firm? is edging closer to a rescue deal for the tobacco supplier Palmer & Harvey (P&H) that would preserve thousands of jobs.

Sky News has learnt that Carlyle, the company whose British investments include the RAC breakdown service, is close to entering a period of exclusivity during which it would seek to conclude a takeover of P&H.

Sources said this weekend that a final deal was still some way off, but would probably involve Carlyle taking a controlling stake in the business, supported by its existing business partners, lenders and customers.
US-based Carlyle has been bidding for P&H against rivals including Brookfield Business Partners, owner of the road-fuel supplier Greenergy.
Insiders cautioned that talks between Carlyle and P&H could still fall apart.
Sainsbury’s has also explored a bid for P&H, as well as having recently terminated exclusive discussions to buy Nisa Retail, a convenience store wholesaler and retailer.

Image: P&H is the biggest tobacco distributor in Britain, supplying Tesco and Sainsbury’s
P&H, which employs about 4,000 people, is the biggest tobacco distributor in Britain, supplying all of Tesco’s stores and thousands of others owned by rival supermarkets such as Sainsbury’s.
It has been trying to find new investors as it seeks a long-term agreement with Imperial Brands and Japan Tobacco International (JTI), two of the world’s biggest cigarette manufacturers.
A rescue of P&H is far from inevitable, with talks about a refinancing only having been completed a few months ago.
If the company collapsed, however, it would create huge supply chain headaches for Imperial and JTI, which between them own brands such as L&B and Silk Cut.
Sky News revealed in the spring that the two companies had hired Deloitte and EY, two accountancy firms, to advise them on the future of P&H – which owes them tens of millions of pounds.
The entire convenience sector is in a state of flux following Tesco’s agreed £3.7bn takeover of Booker, the wholesale giant, and was already experiencing a seismic shift because of growing competition from with online-only retailers.

Competition regulators are examining the Tesco-Booker deal, and have said they will take into account its likely impact on P&H.

Image: The sector is in a state of flux following Tesco’s agreed £3.7bn takeover of Booker
The independently owned delivered wholesaler only recently signed an extension to its supply agreement with Tesco, which accounts for roughly 40% of P&H’s revenues.
P&H hired consultancy firm PriceWaterhouseCoopers (PwC) to oversee a sale process amid pressure from Imperial Brands and JTI to secure a long-term solution.
In April, the two tobacco companies agreed to lend substantial multi-million pound sums to P&H to secure its immediate future.
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.
Lenders to it, which include Barclays and Royal Bank of Scotland, had become increasingly anxious about the potential ramifications of Tesco’s proposed £3.7bn acquisition of Booker.
P&H was established in 1925 as a tobacco and sweets wholesaler, and is the biggest distributor to the UK’s convenience sector.
Serving about 90,000 outlets across the country, it uses a fleet of 1,300 vehicles.
The company is run by Tony Reed, a former boss of Tesco’s convenience retailing business, who joined last year.
P&H and Carlyle declined to comment on Sunday.

Source: SKY