(Alliance News) - Eddie Stobart Logistics PLC on Friday said private equity firm DBAY Advisors Ltd will not make an takeover offer for the full company but will provide a GBP55 million capital injection and take a 51% stake in the company's core subsidiary which holds stakes in other trading companies.
Eddie Stobart said the unit stake sale and capital injection will "ensure the continued viability of the company".
Eddie Stobart Logistics has entered into an agreement to sell a 51% stake in unit Greenwhitestar Acquisitions Ltd to Marcelos, a unit of DBAY Advisors managed DouglasBay Capital III Fund LP.
In turn, DBAY will provide GBP55 million in new financing through a payment in kind facility, which will be used to provide necessary liquidity to the company.
Greenwhitestar Acquisitions holds the interest of Eddie Stobart Logistics in the trading entities of the group.
The Warrington, Chesire-based company said its existing shareholders will own a 49% interest in the operating business of Greenwhitestar, allowing them to participate in the future upside of the business of Greenwhitestar.
Eddie Stobart Logistics said it is continuing to prepare its results for the six months to May 31 and the company's auditors are continuing their review which has identified a number of adjustments. It, however, noted that there was no certainty as to when the interim results would be published.
As a result of the adjustments, the company now expects first half revenue to be GBP435 million and a loss before interest and taxes of not less than GBP12 million. Eddie Stobart Logistics also warned that losses could be higher as the ongoing review by auditors could give rise to material further adjustments.
In September 2019, the company had guided first half revenue of GBP450 million and Ebit in the range of GBP10 million to GBP11 million.
Eddie Stobart Logistics, however, said that its underlying operations have been trading profitably in the second half, though Ebit for financial 2019 will be no more than GBP2 million.
"As a consequence of a reduction in Ebit, poor cash collection and the company's historical dividend policy, net debt for year-end FY19 is expected to be approximately GBP200m, which the board considers 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 the continued viability of the company," Eddie Stobart Logistics said.
Sebastien Desreumaux, chief executive, 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. The proposed transaction announced today provides Eddie Stobart with the opportunity to move forward and look to deliver sustainable growth and profitability from a stable footing."
Eddie Stobart Logistics used to be part of Stobart Group but was split in 2014 and then separately listed on London's AIM market in April 2017. Stobart Group continues to hold an 11.8% in Eddie Stobart.
Shares in Eddie Stobart Logistics are currently suspended from trading in London. Stobart Group shares were up 2.2% at 119.56 pence on Friday.
By Tapan Panchal; tapanpanchal@alliancenews.com
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