Patisserie Valerie rescued in management buyout backed by Causeway Capital Partners

Patisserie Valerie rescued in management buyout backed by Causeway Capital Partners

After being on the brink of complete collapse, Patisserie Valerie and 2,000 of its jobs has been saved

Patisserie Valerie shareholders are relieved as it was confirmed today that an Irish private equity firm will rescue it through a management buyout.

Causeway Capital Partners has made a deal with the cake chain’s administrators with a hope that those who are still working for the business will be able to keep their jobs, according to news first reported by the Daily Telegraph.

After alleged fraud on Patisserie Valerie’s accounts was discovered in October last year, the café chain spiralled downhill and eventually went into administration in January.

According to Sky News, Causeway Capital Partners, who won their bid for business, view Patisserie Valerie as a “heritage brand”.

After 70 café chains being closed immediately last month, it is hoped that this buyout means all 96 which are still open will remain so.

In a statement, Patisserie Valerie said: “Current employees working in the business totalling approximately 2,000 will transfer to a new corporate entity operating the Patisserie Valerie business with their existing employment rights and benefits honoured.”

It is also believed that the brand’s administrator’s, KPMG, have agreed to selling parent company Patisserie Holdings’ other brands Philpotts and Baker & Spice. The two brands currently have 27 outlets between them.

Steve Francis, previously boss of Tulip, will continue as chief executive.

Francis said: “We are delighted to welcome Causeway capital as our partners in Patisserie Valerie, ending a disruptive period of uncertainty for the business. The affection and loyalty for the brand among our customers and employees, and Causeway Capital’s enthusiasm and support for the business, creates for us the foundations for an exciting future for the business.”

Matt Scaife, partner at Causeway Capital, said: “Patisserie Valerie is a heritage brand, much loved by its loyal customers. This investment should mark the end of a turbulent period for customers and suppliers alike. We are delighted to partner with the team and look forward to helping the business return to growth.”

What do these latest developments mean?

Simon Bonney, partner at business advisory firm Quantuma, said: “It is reported that the rescue deal involves the sale of 96 shops to a new company for consideration of £13m. As there has been no statement of affairs filed to date by the administrators, it is not clear whether there are any secured creditors, but it looks likely that with a hole of at least £40m, creditors will get back less than 30p in the pound.

“The £13m will first be used to pay for the costs of trading and the administrators’ fees and expenses. For shareholders, that is likely to be the end of any hope of a recovery from the sale of the business, and they must now seek answers from the ongoing investigations, which will need to be carried out. The job of the administrators, and subsequent liquidators, will be to establish what has happened, how it was allowed to happen, and whether anybody should pay compensation to the company for their role in the affair. The spotlight is likely to be on the Board and Grant Thornton.

“Hopefully, the sale will mean that more than 2,000 jobs have been saved, although it is understood that, with little reliable financial data available, further store closures by the purchasers cannot be ruled out once the stores have traded for a longer period under their control.

“All of Philpotts’ 21 stores have also been sold, but Baker & Spice is still seeking a purchaser.”

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