Imperial Brands and Japan Tobacco International have confirmed they are in discussions with Palmer & Harvey over the wholesaler’s refinancing amid press reports they could be looking to invest in the business to shore up its finances.
According to Sky News, the tobacco giants are considering investing tens of millions of pounds into P&H in return for an equity stake.
The Grocer understands that investment is one of several options being looked at.
“We are aware of P&H’s ongoing refinancing discussions and are talking with them about a range of potential options to support their business. It would be inappropriate to comment further,” said an Imperial spokesman.
A spokesman for JTI added: “Palmer & Harvey is one of the key wholesalers of our products in the UK and we are currently in discussions with its management team to develop future business plans.”
Last month Sky reported that P&H’s lenders were becoming increasingly concerned at the potential impact of Tesco’s planned £3.7bn takeover of the UK’s biggest wholesaler Booker. It claimed P&H’s contracts with Tesco accounted for around 40% of the delivered wholesaler’s business and therefore would have a major impact should Tesco switch these to Booker.
Sky reported that P&H had called in FTI Consulting to advise on the refinancing earlier this year.
The Grocer understands that P&H looks to refinance every year and the tobacco giants are usually party to these discussions. However they have never previously invested in return for equity and there is thought to be more concern this year on the back of the Tesco-Booker deal.
“As part of the planned refinancing process, we are in constructive discussions with our lenders and stakeholders,” said a P&H spokesman. “The company believes it is well placed to take advantage of the many opportunities that the market currently presents.”
The Grocer has also seen a leaked email to staff from P&H CEO Tony Reed sent after the original Sky story that looked to allay any fears that employees may have.
“As the UK’s largest delivered wholesaler, we get media speculation from time to time,” said Reed. “Palmer & Harvey is owned by employees past and present. However, to ensure the efficient running of the business we also have a loan from a syndicate of banks. This debt gets re-negotiated regularly - just like a mortgage on a house, which we are doing this year and which we refer to as refinancing, so it’s very much business as usual.”
Reed joined P&H late last year from Tesco. In the email he went on to say: “Since I joined a few months ago, I’ve enjoyed getting around the branches and getting to know many of you. I have been really encouraged by what I have seen around the team.
“As a management team, we are committed to getting things right to fix, rebuild and grow P&H, and taking the opportunities we see in front of us in convenience retail.”
Sky is also reporting that Sainsbury’s is understood to have agreed to provide interim financial support to P&H. A Sainsbury’s spokesman told the broadcaster: “Through our trading finance platform, we’re able to offer our suppliers financial support.”