There’s no official word of how much the deal is worth (although a sticker price of around £25m plus £50m of working capital has been previously suggested) but it will safeguard 6,000 jobs. The remaining 224 stores will close immediately with the loss of 3,000 staff. Not good news for those concerned of course, but the clock was ticking and the groups ability to keep trading was strictly limited, so administrators KPMG were keen to get a deal in the bag as quickly as possible.
For all its tweedy, pink-cheeked reputation, Dumfries-based Edinburgh Wollen Mill has proved to be something of a dark horse (or should that be white knight?) in the negotiations. A couple of weeks ago it declared itself out of the running, only to reappear in the final furlongs and snatch victory. It’s not the first time its snapped up a high street bargain either, last year it snaffled fashion chain Jane Norman for a song out of administration, too.
As we have noted before on MT, shorn of its crippling £750m debts Peacocks is not a bad business, posting consistent trading profits even through these hard times. So it should make a good buy. It’s also a good fit, as Peacock’s caters for a younger more fashionable crowd than the doughty over-40s on which EWM has made its name.
What is also interesting is that both businesses are the product of MBO’s - EWM was bought out by current boss Philip Day in 2002 while Peacocks chief Richard Kirby did the deed in 2005 with private equity backing. The difference being largely in both the scale and nature of debt involved - the Peacocks deal relied on the issuance of £110m in so-called Payment in Kind (PIK) notes, attracting a whopping 17.2% interest. Pauper’s rates in other words.
Had Kirk been able to refinance quickly (as was no doubt his intention) then the story might have ended very differently. But the post 2007 finance climate put the kybosh on such plans, after which the laws of compound interest did the rest. Let’s hope that Edinburgh Woollen Peacocks has an altogether brighter future.