(Adds comments from administrator, Japan Tobacco, details on jobs)
By Martinne Geller
LONDON, Nov 28 (Reuters) - British retail supplier Palmer & Harvey McLane Ltd has been placed in administration after running out of cash, with the immediate loss of some 2,500 jobs, accounting firm PwC said.
The group, which delivers cigarettes, food and drinks to retail chains and convenience stores, has been hit by challenging trading conditions in recent months and efforts to restructure it have been unsuccessful, PwC said on Tuesday.
“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,” said Matthew Callaghan, an administrator at PwC, which has been appointed to oversee the process.
It was necessary for Palmer & Harvey - which says it is Britain’s fifth-largest private company - to make about 2,500 of its 3,400 employees redundant immediately, PwC said.
The 92-year-old company has about 90,000 customers ranging from small local shops to major supermarket chains, supplying them with up to 12,000 different products.
However, supermarket chain Tesco’s 3.7 billion pound deal to acquire rival wholesaler Booker Group had been expected to put further pressure on P&H’s business.
The job losses will affect its head office in East Sussex and its branch network, which includes 14 distribution centres around the country.
Of the remaining 900 jobs, about half of them are in the company’s core wholesale business and will help manage it toward an orderly closure, and the other half are in three subsidiaries the administrators are seeking to sell.
P&H could not be reached for comment.
Under the British administration process a company which cannot pay money it owes is protected from its creditors while administrators seek to pay as much of its debts as possible.
One of P&H’s major suppliers, tobacco company Imperial Brands, said it expects a one-time profit hit in the current year of up to 160 million pounds ($213 million), mostly related to excise duty which is non-recoverable. It does not anticipate any significant disruption to its UK operations.
Imperial, maker of Gauloises cigarettes, said it had been working for several months on a rescue plan for P&H and “was prepared to explore further alternatives but other parties have been unwilling to pursue these to a successful conclusion”.
Imperial and rival Japan Tobacco International both hired advisers to examine options to rescue P&H earlier this year.
A spokesman for the Japanese group’s international division said it had worked continuously to facilitate a constructive solution, including extending “significant” financial and operational support.
“Regrettably our considerable efforts were not successful,” he said, adding that a contingency plan was in place to avoid any significant interruption in the supply of its cigarettes.
Carlyle Group, which had been in talks to buy P&H as part of a rescue deal, declined to comment.
The administrators said they are continuing to explore options for a sale of several P&H entities including P&H Direct Van Sales Ltd, P&H Sweetdirect Ltd and P&H Snacksdirect Ltd. ($1 = 0.7495 pounds) (Additional reporting by Ben Martin; editing by Alexander Smith)