Ashursts restructures P&H for MBO

Ashurst Morris Crisp has advised Palmer Harvey McLane (P&H) on various restructuring proposals, which culminated in a management buyout (MBO) offer with Ashursts acting for the management.
P&H is the UK's largest delivery wholesaler, with a turnover in excess of £3bn. The company started out in tobacco wholesaling, but has diversified across food and alcohol, supplying customers ranging from corner shops to Sainsbury's. It is also one of the largest privately-owned companies in the UK.
An Ashursts team led by head of company Chris Ashworth, company partner Paul Gadd, head of tax John Watson and tax partner Barbara Allen, worked on the offer for more than 12 months. Ashworth said: “It was very satisfying to work on the buyout, which is designed to ensure that 2,400 of the current management and employees have a 75 per cent interest in the group.”
While Ashursts was preferred for restructuring advice, Trowers & Hamlins, a longstanding adviser of P&H, acted for the company on the MBO. The Trowers team was led by partners Amir Hashemi and Michael Pattinson. Finance for the deal was provided by Barclays and Burdale, which were both represented by Robert Smith of Clifford Chance.
Ashworth worked on the original MBO of P&H in 1988. The line-up for 2001 looked very similar to that of 1988's, with Trowers and Clifford Chance performing similar roles.
The deal was complicated in its corporate structure and its financing. Ashworth said: “This is basically the most complicated thing I've come across in my 23 years as a lawyer.” The complex equity structure had to balance the interests of the 700 existing shareholders, many of whom are ex-employees, with those of the current 2,400 management and employees.
Three companies were involved in the bidding group for the issue of seven different forms of securities. The Ashursts tax team also structured the offer to allow the preferential shares to be issued as tax-efficiently as possible.
The offer on the table is for £80m in cash, or cash equivalent, of which around £30m is available from P&H's current resources. Total facilities of £160m have been arranged to fund the acquisition price and to provide working capital for P&H. The financing was novel in that the syndicated asset finance facility is one of the largest ever to be arranged in the UK for an MBO. If the offer is successful, the deal is expected to be completed by the end of February.