Last-ditch deal to save cash and carry king

ONE of Britain’s biggest wholesalers is on the brink of a takeover after cigarette firm Imperial Brands injected emergency cash to help pay its debts.

Palmer & harvey is the country’s fifth largest privately owned firm, with all shares held by its staff.

Its 4,000 employees are now waiting to discover whether a deal can be reached.

The firm delivers 12,000 products to 90,000 stores across the country, ranging from corner shops and petrol stations to supermarkets, and has a long-running partnership with tobacco companies.

But margins in the industry are tight, and the business has struggled to make money for years.

There are also questions over its vital relationship with Tesco, which accounts for 40pc of revenues. The supermarket is buying rival wholesaler Booker for £3.7bn, and it is feared this deal will hit P&h hard if Tesco switches allegiance.

Imperial – which makes Gauloises and Davidoff cigarettes – lent P&h £30m in a refinancing deal earlier this year to keep it afloat. Japan Tobacco International also loaned P&h £30m.

Fresh bills are due on Saturday, and it is understood the two firms have vowed to pump in extra cash to help P&h stay afloat.

This buys time for the wholesaler to agree a rescue deal with private equity firm the Carlyle Group. Any rescue deal is also likely to feature an extension to the three-year distribution deal P&h has with Tesco. P&h lost £17.3m in the year to April 2016, the most recent period for which figures are available, after an £8.5m loss the year before. Profits were hit by a deal with budget retailer Costcutter, which took over 800 of P&h’s Mace, Supershop and Your Store outlets. This took longer to go through than predicted, landing the firm with an unexpected £10.7m bill.

Imperial said: ‘We have been working, with other stakeholders, to seek to create a sustainable future for Palmer & harvey, with whom we have a close trading relationship.’

P&h and Carlyle Group declined to comment last night, while Japan Tobacco International confirmed that it would be supporting the business.