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Imperial Brands in talks to rescue UK's biggest cigarette supplier Imperial Brands in talks to rescue UK's biggest cigarette supplier
(about 1 hour later)
Tobacco giant Imperial Brands said it was working on a rescue deal for wholesaler Palmer & Harvey, which supplies tobacco to Tesco and other retailers. The tobacco firm Imperial Brands is working on a rescue deal for the wholesaler Palmer & Harvey, which supplies tobacco to Tesco and other retailers.
In a trading update, Imperial said it was working with others to “create a sustainable future” for Palmer & Harvey, stressing its “close trading relationship”.
Palmer & Harvey is the biggest cigarette supplier in the UK and employs 4,000 people.Palmer & Harvey is the biggest cigarette supplier in the UK and employs 4,000 people.
The announcement comes after reports that Imperial and Japan Tobacco International plan to roll over £60m of outstanding loans to Palmer & Harvey, as part of a rescue deal that would involve private equity firm Carlyle. Imperial and Japan Tobacco International, which were involved in a refinancing round in early April and each gave Palmer & Harvey a £30m loan, are expected to provide enough funding to keep the firm afloat, allowing it to hammer out a rescue deal with Carlyle, a private equity firm.
The rescue deal is also expected to involve Tesco agreeing to an extension of its deal with Palmer & Harvey. Imperial, maker of Davidoff and Gauloises cigarettes, said in a trading update that it was working with others to create a sustainable future for Palmer & Harvey, stressing its “close trading relationship”.
The wholesale sector has been rocked by Tesco’s £3.7bn takeover of cash and carry group Booker, which faces an in-depth investigation by the competition watchdog. Another key partner is Tesco, which accounts for about 40% of Palmer & Harvey’s revenues. Any rescue deal is expected to include an extension of the supermarket’s three-year distribution deal with Palmer & Harvey.
Based in Hove in east Sussex, Palmer & Harvey supplies 12,000 products, including chilled foods and alcohol, to major retailers, corner stores and petrol station forecourts. The business, which started in 1925, is owned by its employees. The wholesale sector has been rocked by Tesco’s £3.7bn takeover of the cash and carry group Booker, which faces an in-depth investigation by the competition watchdog.
Industry experts have warned that if Tesco shifts its business from Palmer & Harvey to Booker, the former will not be able to compete. But Tesco could extend its contract with Palmer & Harvey in an attempt to get its Booker takeover cleared by the Competition and Markets Authority.
Based in Hove, East Sussex, Palmer & Harvey supplies 12,000 products such as chilled foods and alcohol to 90,000 shops around the country, including large retailers, corner stores and petrol station forecourts.
The business, which was launched in 1925, is owned by current and former employees. It is run by Tony Reed, a former Tesco executive who previously managed the supermarket’s 3,000 convenience stores. Reed became chief executive of Palmer & Harvey last October and is expected to stay on after the rescue deal.