Eddie Stobart Logistics agrees conditional rescue deal with DBAY Advisors as debts rise to £12m

Eddie Stobart Logistics (ESL) has entered into a conditional sale and purchase agreement with private equity investor DBAY Advisors.

In an update to the London Stock Exchange, ESL also revealed it is expecting a loss of at least £12m when its delayed half-year results are finally published.

It said "shareholders should note that losses could be higher".

Under the terms of the sale proposal, DBAY would acquire a 51% stake, with existing shareholders having a 49% interest. It is also proposing an injection of approximately £55m of financing into the group's operations to “be used to provide necessary liquidity.”

The proposed takeover is subject to shareholder approval, with a general meeting scheduled for around 2 December.

The board believes that the group's underlying operations have been trading profitably in the second half but expects EBIT for the full year of no more than £2m.

ESL also revealed that net debt by the end of the year is expected to be approximately £200m, which the board considered to be "an unsustainable level for the group".

"The combination of these items has led the board to consider numerous potential options, including a sale of the company, to ensure its continued viability," the update continued. 

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Commenting on the announcement, ESL CEO Sébastien Desreumaux, said: "We are undertaking a thorough review of the operations and, whilst this has highlighted a number of short-to-medium term challenges which the team and I are working determinedly to resolve, it has also reaffirmed my view that the company, and its extensive operational capabilities and unique network, is anchored by strong underlying fundamentals with significant potential for the future.

"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. The proposed transaction provides Eddie Stobart with the opportunity to move forward and look to deliver sustainable growth and profitability from a stable footing."

A DBAY spokesperson added: “Eddie Stobart is a historic trucking brand that DBAY has worked with successfully in the past. As committed long-term investors, we believe the company has the people, resources and reputation to thrive and deliver a high-quality and reliable service to customers.

“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.”

DBAY owned 51% of Eddie Stobart before it floated on the Stock Exchange in 2017. By October this year its holding had reduced to 11%.