Trucking On: Eddie Stobart approves rescue deal
January 23, 2020
2 min read
What's going on here?
Eddie Stobart’s shareholders have voted overwhelmingly in favour of a £55m rescue deal involving private equity firm Douglas Bay Capital Fund (Dbay).
What does this mean?
Prior to Dbay’s intervention, struggling haulage company Eddie Stobart had £200m worth of debt and was at real risk of facing administration. As a result of the deal, Dbay has acquired a 51% majority stake in Greenwhitestar Acquisitions Ltd, a wholly-owned subsidiary of Stobart. The main reasons cited for Stobart’s financial woes were poor cash collection and an accounting error amounting to £2m in 2018.
This £55m injection of funding from Dbay comes with a hefty 18% interest rate tag. The troubled company maintains that this deal will provide it with the opportunity to move forward and focus on delivering services into the new decade.
The approval of this deal comes after rival bidder, Andrew Tinkler, had its package rejected by the Eddie Stobart board. William Stobart, the son of founder Eddie Stobart, has been appointed Chairman under the terms of the deal.
What's the big picture effect?
This deal brings the troubled trucking firm back from the brink of administration and is likely to save 6500 jobs. Shares in the company were suspended in August at 71p each, after the discovery of the £2m discrepancy in their accounts. As a result of this deal, shareholders are left with only a 49% stake in the company. This means that once the stock restarts trading on the London Stock Exchange, they are set to tumble.
Not everyone is happy with the tie-up. The Unite Union has accused Dbay of perpetrating “bandit capitalism” by taking advantage of Stobart’s vulnerable financial position. There are concerns that Dbay’s proposal mainly serves to pay back lenders and cover Dbay’s own fees, rather than focusing on Eddie Stobart’s future. This deal will confer onto Dbay control of Stobart as well as priority to any money it makes, as debts are paid before shareholders.
Whether Stobart would have submitted to the deal were it not for the mounting pressure being exerted by its lenders (AIB, BNP Paribas, Bank of Ireland and KBC) is now a moot point. The company has staved off disaster in this episode, but it remains to be seen how it will fare in the long run.
Report written by Maya Sajeev
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