Around 2,500 staff have been made redundant at Palmer & Harvey after it collapsed into administration despite attempts to secure a lifeline for the troubled wholesaler.
The 90-year-old firm has appointed PwC as administrators after “challenging trading conditions” heaped pressure on its cash flow and efforts to revive the business failed to take hold.
The group entered exclusive takeover talks with the Carlyle Group in October, but the US private equity fund’s offer of a significant capital investment in exchange for a controlling stake did not progress.
P&H, the UK’s biggest supplier of cigarettes, employs about 3,400 people, provides alcohol, groceries and frozen food to 90,000 retail accounts – including Tesco – and supplies from 14 regional distribution centres.
In a major blow for the company’s workforce ahead of the Christmas period, PwC said there would be 2,500 immediate redundancies at the head office and branch network. About 900 staff will remain at risk.
The move has also triggered emergency plans at P&H customer Costcutter, which is searching for other suppliers in the wake of the collapse.
Matthew Callaghan, joint administrator and PwC partner, said: “This is a devastating blow for everyone who has been involved in the business.
“The administration team will focus on working with employees, clients and suppliers to facilitate a smooth and effective wind-down or transfer of operations over the next few weeks.
“The P&H Group has faced a challenging trading environment, and the need for significant restructuring has been recognised for some while.
“The company has insufficient cash resources to continue to trade beyond the short term and the directors have concluded that there is no longer any reasonable prospect of a sale.
“Therefore, the directors have had no choice but appoint administrators.”
PwC said it had secured staff pay for the November period and was now seeking buyers for the group’s subsidiary businesses, P&H Direct Van Sales, P&H Sweetdirect and P&H Snacksdirect.
It said 450 workers had been kept on in the wholesale business as the operation is moved towards an “orderly closure”.
Mr Callaghan added: “The administrators are working closely with employees affected by the closure of the business to ensure they receive the support they need during this difficult time to assist with their claims for redundancy and other compensatory payments.
“Our priority is to ensure that all employees made redundant are assisted in processing their claims with immediate effect.”
Costcutter Supermarket Group, which owns Mace, Simply Fresh, Kwiksave and SuperShop, said it had triggered its contingency plans following the announcement.
A Costcutter spokesman said: “We have activated our contingency plans to provide alternative sources of supply through appropriate regional and national options.”
P&H had been working with stakeholders Imperial Brands and Japan Tobacco International (JTI) as it searched for relief from thin profit margins and a substantial debt burden.
A spokesman at JTI, which owns cigarette brands Camel and Benson & Hedges, said: “Throughout the whole process JTI has worked continuously to facilitate a constructive solution to the P&H group’s challenges including extending significant financial and operational support to allow P&H to continue its operations.
“Regrettably our considerable efforts were not successful.
“We have a contingency plan in place and we do not expect any significant interruption in the supply of our products.”
The fall of P&H comes amid a period of consolidation within the grocery sector, with Tesco agreeing a £3.7 billion deal with food wholesaler Booker and the Co-op sealing a takeover of Nisa Retail.
The Competition and Markets Authority (CMA) gave the Tesco-Booker deal the provisional green light earlier this month, saying the move would not lead to higher prices or hit service for shoppers despite fears raised by a raft of rival wholesalers.
Mark Todd, national officer of the Union of Shop, Distributive and Allied Workers (Usdaw), said: “The union is seeking an urgent meeting with the administrators to clarify what is going on and the implications for Usdaw members.
“Today’s announcement is a massive shock to our members and is an extremely distressing situation for all concerned, especially in the run up to Christmas.”