Eddie Stobart agrees £55m rescue deal as losses mount up
Eddie Stobart has issued a warning to shareholders that its expected losses for the six months ending 31 May stand at more than £12m.
The British haulier delayed the publication of its results after undertaking a review of its accounts following the discovery of a £2m error in its 2018 results.
The company’s shares were suspended in August as a result.
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In its latest update, Eddie Stobart said it was continuing to prepare its half-year results but warned investors it expected a loss of at least £12m.
It added that “shareholders should note that losses could be higher”.
These losses combined with “poor cash collection” and dividends paid out means Eddie Stobart is expecting its debt to stand at £200m by the end of the year, “which the board considers to be an unsustainable level”.
Takeover
Subsequently, a deal to sell Eddie Stobart to the Douglas Bay Capital Fund has been conditionally agreed.
Dbay, which already owned a stake in the company, has made a £55m offer to take a 51 per cent majority share.
“As part of the Proposal, the Fund would (directly or indirectly) inject approximately £55m of financing into the group’s operations through a PIK loan instrument, which will be used to provide necessary liquidity,” Eddie Stobart’s board noted.
Existing investors’ own shares would be turned into parts of a 49 per cent stake in the holding company, Stobart said.
The proposed takeover is subject to shareholder approval, with a general meeting scheduled for around 2 December.
Commenting on the announcement, chief executive Sebastien Desreumaux said a thorough review had reaffirmed his belief the company “is anchored by strong underlying fundamentals with significant potential for the future”.
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“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.”
He said the proposed takeover by Dbay would give Stobart a “stable footing” for growth.
A Dbay spokesperson said: “Given the difficult circumstances, our proposal is a realistic chance to secure value for all shareholders and safeguard jobs for Eddie Stobart’s employees. This is a significant investment for Dbay, reflecting our belief in the Company.
“Our team has delivered this sort of turnaround before and it is vital that significant action is taken to rescue the Company before the busy Christmas trading period.”