l This is not the first MBO at P&H. In the late 1980s, the Stone family was looking to sell the business it had founded back in 1925. The family settled on an open auction which resulted in the then managment team buying the business in 1988 l Those managers, their families and heirs owned P&H from 1988 to 2002 l In 2000, merchant bankers Close Brothers reviewed future ownership options. It felt the best opportunity was to re-leverage the company l In January 2001, shareholders were approached with an outline proposition. They backed the idea of an MBO l The government's decision to end forestalling on tobacco, and end its practice of levying massive duty hikes, hit the profitability of the category for all wholesalers. As a result a new proposition had to be tabled for P&H shareholders in March 2001 l This new proposal gave the existing shareholders a degree of ownership but allowed the current management to own more than half the business l Bankers were then sought to provide funding and at the end of the year, the offer was launched. It was completed in February 2002 l Employees with more than two years' service could buy a stake in the business l To fund the MBO, P&H used £30m of cash and £50m borrowed from the bank. The company also borrowed £86m from shareholders in two forms: 50% in the form of junior debt and 50% in the form of preferred equity. There was also £6m of ordinary shares, 75% of which were bought by employees. {{COVER FEATURE }}