Conviviality sells wholesale arm to C&C, talks continue over retail chains

Ireland's C&C, which was mooted as a potential suitor earlier in the week, said on Wednesday morning that it was in "advanced discussions" to buy Conviviality Direct, trading as Matthew Clark and Bibendum subsidiaries, which supply more than 23,000 pubs, restaurants, restaurants and clubs, including the JD Wetherspoon chain, as well as 700 off-licences.

Later in the day AIM-listed Conviviality confirmed the sale of Matthew Clark and Bibendum, meaning all trade creditors of the wholesale business will be paid in full, customers' and suppliers' booze contracts are assured and the 1,900 Conviviality Direct employees keep their jobs.

Payment for the acquisition will be a nominal sum, with C&C agreeing to pay £102m to Conviviality's secured lenders over the next 12 months to repay the wholesale unit's bank debts. C&C said Budweiser and Bacardi owner Anheuser-Busch InBev will "provide additional financial support to the transaction".

Conviviality said it "continues to pursue opportunities" in respect of the retail business, trading via the Bargain Booze and Wine Rack chains, and will provide an update in due course.

It stressed that only the Conviviality Brands business had appointed administrators and that "no other companies in the group have had administrators appointed and such other companies continue to trade".

The deal comes less than three years after Conviviality bought Matthew Clark for £200m and after a breakneck collapse that took less than two months from the company upping its interim dividend after a “robust” first half, before the discovery of a "material error" in March's financial forecasts and an unexpected tax bill tipped the company over the edge.

Conviviality later on Wednesday confirmed the discussions with C&C and said it was also "in discussions with a number of other parties interested in the purchase of the retail business", which includes the Bargain Booze and Wine Rack chains.

The wholesale arm generated revenues of £1.2bn and adjusted EBITDA of £51.3m in its last full year results, though a recent profit warning stated adjusted EBITDA for the entire group for the year ending 29 April 2018 would be £45.5-46m.

"The proposed acquisition is conditional upon, amongst other things, the appointment of administrators to Conviviality Brands Limited (the seller), which is expected to occur later today. A further announcement will be made later this morning," C&C said.

C&C chief executive Stephen Glancey said the appointment of administrators to Conviviality is expected to occur later on Wednesday.

“We know the Matthew Clark and Bibendum businesses very well,” he said. “They are great businesses with unparalleled on-trade market access, a wide range of supplier relationships and supported by a knowledgeable and loyal employee base.”

“The last few weeks have been challenging for employees, customers and suppliers alike. We hope today’s announcement can put an end to this period of disruption and uncertainty. We look-forward to working with our new colleagues and other stakeholders to bring stability and restore the group’s position as one of the leading and most respected drinks suppliers to the UK hospitality sector.”

The shares of Conviviality Plc remain suspended pending further notice.