February 14, 2019 / 10:46 AM / 10 months ago

Patisserie Valerie rescued by Irish fund Causeway

(Reuters) - Private equity fund Causeway Capital Partners confirmed on Thursday that it had agreed terms with administrators to buy British cafe chain owner Patisserie Holdings for an undisclosed sum.

FILE PHOTO: A woman walks past a branch of Patisserie Valerie in London, Britain, October 10, 2018. REUTERS/Simon Dawson

The deal, flagged by the Financial Times earlier in the day, will be funded with investment from the Ireland-based fund and the new management of Patisserie, led by Chief Executive Officer Steve Francis, Causeway Capital said in an email.

The company’s Patisserie Valerie chain plunged into crisis in October after its owner uncovered accounting irregularities. It hired KPMG as administrators in a last-ditch attempt to save the company, which traces its roots back to a shop founded 93 years ago.

Patisserie will maintain 96 branches across Great Britain and Northern Ireland, Causeway said, adding that 2,000 employees will transfer to a new corporate entity operating the Patisserie Valerie business with their “existing employment rights and benefits honoured”.

“We are delighted to welcome Causeway Capital as our partners in Patisserie Valerie, ending a disruptive period of uncertainty for the business,” Francis, a turnaround specialist who took the helm in November, said.

Earlier this week British retail tycoon Mike Ashley’s Sports Direct withdrew an offer of more than £15 million to buy Patisserie out of administration, a source told Reuters.

KPMG partner David Costley-Wood had told the company it would need to raise its offer by as much as £2 million, the Financial Times reported at that stage.

Causeway declined to comment on the deal value, while KPMG did not immediately respond to a request for comment.

“This looks like good news for Patisserie Valerie and its staff, though the jury is still out on how many outlets might actually be saved, as negotiating with landlords may prove tricky,” Laith Khalaf, Senior Analyst at brokerage Hargreaves Lansdown, said in an email.

“The high street is still a tough place to do business right now, and Patisserie Valerie will have to work extra hard because it’s also reeling from the recent accounting scandal,” he said.

Patisserie Holdings, whose cafes are best known for their range of cakes, ran around 200 outlets, employing about 2,500 people, and had a stock market value approaching £500 million before it ran into trouble.

Causeway Capital Partners were advised on the deal by Burges Salmon Solicitors.

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Shailesh Kuber

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