Palmer & Harvey MBO Values Supplier at £345m

Source from:  By Tom Braithwaite April 7 2008 04/08/2008

Palmer & Harvey, the wholesaler that supplies almost a third of Britain's tobacco and one of the country's biggest private companies, has changed hands in a management buy-out, at an enterprise value of £345m. With turnover of about £4bn, Palmer & Harvey vies with listed Booker at the top of the wholesale business, supplying independent grocers as well as store chains with food and alcohol. However, it is supplying tobacco to supermarkets and smaller grocers that accounts for the majority of the Palmer & Harvey business by value and its wafer-thin margins. The MBO was led by Chris Etherington, chief executive, and completed just before the changes at the weekend to capital gains tax, allowing Christopher Adams, chairman former chief executive, to sell most of his holding to the new team and pay the lower tax rate. "We've been working on it for 15 months and it was tight at the end," said Mr Adams. Barclays Commercial Bank and Burdale Financial funded the deal with a debt package comprising a £280m receivables finance facility, £50m in senior debt and a loan note guarantee facility of £117m. Bankers had hoped the company would be a possible initial public offering but that option was ruled out in the past year amid worsening market conditions. Mr Etherington said he hoped the transaction had created "significant share ownership opportunities" for employees and "secured the best management team . . . [for] further growth and expansion". In spite of sizeable revenues, which place Palmer & Harvey among the top five private companies in the UK, it struggles with the low margins in the wholesale sector, particularly in tobacco. It produced an operating profit of £31.3m on turnover of £4bn in the year to April 2007. "This transaction is indicative of the relative stability of the wholesale food sector in comparison to other retail and wholesale sectors," said Kevin O'Sullivan, relationship director at Barclays' retail and wholesale team. Enditem