Yahoo Movies Eddie Stobart transport firm teeters on brink of collapse
The Eddie Stobart transport business, famed for its red and green lorries, is teetering on the brink of collapse with its future due to be decided at a key shareholder vote in London on Friday.
The vote will pit William Stobart, the third son of the company’s founder, against his childhood friend and former brother-in-law, Andrew Tinkler.
If their competing bids fall through, the company could collapse under the weight of a huge debt pile months before its 50th birthday.
The Warrington-based company, which counts Amazon, Coca-Cola and Tesco among its customers, recorded a loss of at least £12m in the first half of the financial year. It is also struggling with £200m worth of debt. However, accounting problems revealed in August mean the financial situation could be much worse.
Unions said up to 6,500 Eddie Stobart workers are at risk of becoming victims of “bandit capitalism” as the group’s shareholders choose between rival bids. Insolvency experts from Deloitte have been lined up to take over as administrators if the business collapses.
It is a crisis moment for the only household name in British trucking. Eddie Stobart founded his business in 1970 in Carlisle but it was his second son, Edward, who led its expansion. Drivers in shirts and ties were instructed to honk back when members of the public waved at them and all the trucks were given female names.
The company even has an official fan club, a Channel 5 TV series and merchandise featuring a Steady Eddie cartoon character.
But steadiness has not been the watchword in the boardroom in recent years. As boss of Stobart Group from 2004, Tinkler listed the business and expanded into projects as diverse as wood-burning generators and running Southend airport.
He then sold off the original Eddie Stobart Logistics (trucking and warehousing) arm in 2014 to private equity firm Douglas Bay Capital, (DBay) who put William Stobart in charge.
Under William’s leadership, Eddie Stobart made numerous acquisitions in e-commerce and building materials transport. The company floated again on London’s junior market in 2017, with investors including former star fund manager Neil Woodford piling in.
The float earned DBay, founded by private equity investors Saki Riffner and Alex Paiusco, a windfall of more than £150m.
However, mounting debt, poor cash collection, lower earnings and accounting problems have endangered the jobs of thousands of workers in warehouses and trucks across the UK.
In August, the company delayed publication of its financial results and said it was investigating multiple accounting issues. Its shares have been suspended ever since and Eddie Stobart’s banks – AIB, BNP Paribas, Bank of Ireland and KBC – are hovering for repayment of their loans.
The company’s board said it desperately needed cash to tide it over the busy Christmas period. DBay has returned to the table with an offer of a £75m bailout but with loans at interest rates as high as 25%.
In return, it would gain majority control over Eddie Stobart’s operating company, in an unusual structure that has drawn criticism from shareholders and unions. William Stobart, who left at the time of the float, would also be brought back to run the business.
Lined up against him is Tinkler, who said he could secure £80m in equity fundraising from friends and investors.
The outspoken Tinkler, whose passions have included racehorses and a private jet, was ousted by Stobart Group last year following a boardroom bust-up. Earlier this year he lost a court case against Stobart Group, where he claimed wrongful dismissal. The judge presiding over the case complained about Tinkler’s “bellyaching” over his pay.
His proposed takeover vehicle, TVFB, claimed on Monday to have the backing of the vast majority of Eddie Stobart shareholders.
The company’s board, however, has recommended shareholders back the DBay deal. On Wednesday, Eddie Stobart said its banks supported the DBay proposal. It quoted a letter from the banks’ advisers saying they would only back a deal in which they were repaid in full before the shareholder vote on Friday morning.
Worker representatives have expressed doubt about whether the deal is needed so urgently, hoping that another buyer could still emerge. Rival firm Wincanton recently walked away from talks. They also questioned how much of the bailout funds will reach the business.
Unite’s national officer for road transport, Adrian Jones, said: “This deal provides no certainty beyond the very short term for the workforce who are set to be the latest victims of ‘bandit capitalism’.”
A report commissioned by Unite by consultants Syndex, said the cash injection after the banks have been repaid could be as low as £15m. This would be less than the £24m paid out to shareholders in a dividend earlier this year.
DBay, which hopes to take control of Eddie Stobart for the second time in three years, declined to respond to the union’s criticism.
