Planet Organic has until next week to secure a deal to save the struggling supermarket chain, with a rescue plan outlining a new slimmed-down business, according to documents seen by The Grocer.
The group is currently locked in talks with potential investors and has administrators on standby as it races to secure a pre-pack administration deal.
Planet needs £3m to implement a rescue plan put together by CEO George Dymond and private equity owner Inverleith, The Grocer has learned.
The plan would keep the majority of the 14 shops open, securing the jobs of most of the 360-strong workforce, and alter the store format to focus more on health and beauty products, which have higher margins, as well as healthy juices and snacks.
It would mean a reduced grocery range and the removal of the food-to-go offering, except for hot drinks.
The new leaner business is expected to be profitable in its first year, following four years of losses for the group.
A £3m capital injection would include a small purchase price for a pre-pack administration deal, with the rest of the money used to reformat the remaining stores, pay rent, buy new stock and pay continuing suppliers a proportion of money already owed in instalments.
Planet would also renegotiate terms with the owner of its distribution centre in Sunbury-on-Thames, Howard Tenens Logistics, and reduce the size of the facility to suit the new slimmed-down business.
Any deal would also retain the wholesale contract to supply Waitrose with Planet Organic products.
Last week, it emerged that Redbus, an investment firm set up by one of the founders of Lovefilm, was in talks to table a bid for Planet, as reported by Sky News.
However, The Grocer understands any bid from the firm would be for the Planet brand and not the operations. A number of other interested parties are also in talks to save the business, with the potential for a bid to save all stores.
Planet also last week filed a notice of intention to appoint administrators with the courts to provide the group with breathing room until 17 April while it attempts to secure a rescue.
Dymond said in a letter to suppliers, seen by The Grocer, that the future for Planet Organic was uncertain but management were “still working hard” to explore alternative options to secure investment.
“[It would] enable us to preserve our amazing business and we remain in dialogue with a number of other interested parties,” the letter added.
“I want you all to know how very sorry I am that we are in this position, and that we will continue to do everything we possibly can to secure Planet Organic a future. Please bear with the teams, they are taking calls and responding to emails but are getting through a large volume of queries. I will endeavour to keep you updated over the coming days.”
Planet engaged advisors at Interpath Advisory earlier this year to explore its options for fresh financing and potential buyers after struggling with lower footfall across its London store base during the pandemic, which resulted in five shops being closed permanently.
Higher costs for its new distribution centre – opened last year in Sunbury-on-Thames to centralise its supply chain operation for the first time – and for legacy larger stores also squeezed the company’s cashflow position and contributed to losses in each of the past four financial years, including the current period due to end in August 2023.
Planet’s survival was put into doubt after Waitrose pulled out of a potential deal to invest millions of pounds in its smaller rival.
“Regrettably and unexpectedly these discussions [with a potential investor] ended last Friday without an investment being agreed,” Dymond said in the letter to suppliers. “This is largely because of the current uncertainty in the retail sector, as well as market caution more broadly.”
Planet has temporarily suspended new orders to suppliers as it works on a rescue deal.
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