Struggling Stobart agrees to cut price deal in bid to save business from collapse

One of the country’s most famous brands looks to have been saved from collapse after a £55m rescue deal was agreed.

Haulier Eddie Stobart has been fighting for survival due to a series of issues and an ongoing accounting scandal which meant it has been unable to publish its financial results.

The troubled Warrington business and thousands of jobs appear to have been saved in a cut price deal that will see shareholders lose out.

The company claimed it had no option to sell due to the unsustainable level of debt and the problems surrounding its auditing procedures.

The firm has agreed to a deal that will see Isle of Man based Douglas Bay Capital Fund buy a 51 per cent stake of a new entity that would then become the holding company for Eddie Stobart.

Rival haulier Wincanton has also been considering buying the firm.

Existing investors’ own shares in the firm will be turned into part of a 49 per cent stake in the holding company.

The firm has been sold at a huge discount to Eddie Stobart’s share price in August, when it suspended shares over the ongoing accounting scandal.

At the time shares were valued at 71p, giving the business a value of almost £270m.

The firm announced that it had agreed to the sale this morning but also admitted it is still unable to publish its results.

The company did reveal that at the moment the firm it is looking at a loss of £12m but the final figure could be much higher.

A lengthy statement was published this morning giving an update.

Eddie Stobart said it is still working on its interim figures for the six months up to May of this year and auditors are carrying out an ongoing review.

In the meantime, the company published and update that takes into account a number of adjustments.

The impact of the adjustments means that losses will be at least £12m but the final figure could be much higher.

The board added that the group’s underlying operations have been trading profitably in the second half and the board expects EBIT for the full year of no more than £2m.

As a result of a reduction in EBIT, poor cash collection and the company’s historical dividend policy, net debt for year-end FY19 is expected to be approximately £200m.

As part of the rescue deal DBAY has agreed to inject £55m of new financing into the group’s operations through a PIK Facility, which will be used to provide necessary liquidity.

The deal is subject to a number of conditions including shareholder approva at a general meeting of the company which will be held next month.

Sébastien Desreumaux, chief executive of Eddie Stobart said: “We are undertaking a thorough review of the operations and, whilst this has highlighted a number of short-to-medium term challenges which the team and I are working determinedly to resolve, it has also reaffirmed my view that the company, and its extensive operational capabilities and unique network, is anchored by strong underlying fundamentals with significant potential for the future.

“During the course of the year we have secured a number of customer wins and extensions, and in particular I am pleased to announce that our contract with Tesco has recently been renewed for a further 12 months up to March 2021.

“The proposed transaction announced today provides Eddie Stobart with the opportunity to move forward and look to deliver sustainable growth and profitability from a stable footing.”