Tobacco firm working on deal to ease debt crisis at UK’s biggest cigarette distributor, which supplies Tesco and other retailers

This article is more than 2 years old

This article is more than 2 years old

The tobacco firm Imperial Brands is working on a rescue deal for the wholesaler Palmer & Harvey, which supplies tobacco to Tesco and other retailers.



Palmer & Harvey is the biggest cigarette supplier in the UK and employs 4,000 people.

Imperial and Japan Tobacco International, which were involved in a refinancing round in early April and each gave Palmer & Harvey a £30m loan, are expected to provide enough funding to keep the firm afloat, allowing it to hammer out a rescue deal with Carlyle, a private equity firm.

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Imperial, maker of Davidoff and Gauloises cigarettes, said in a trading update that it was working with others to create a sustainable future for Palmer & Harvey, stressing its “close trading relationship”.

Another key partner is Tesco, which accounts for about 40% of Palmer & Harvey’s revenues. Any rescue deal is expected to include an extension of the supermarket’s three-year distribution deal with Palmer & Harvey.

The wholesale sector has been rocked by Tesco’s £3.7bn takeover of the cash and carry group Booker, which faces an in-depth investigation by the competition watchdog.

Industry experts have warned that if Tesco shifts its business from Palmer & Harvey to Booker, the former will not be able to compete. But Tesco could extend its contract with Palmer & Harvey in an attempt to get its Booker takeover cleared by the Competition and Markets Authority.

Based in Hove, East Sussex, Palmer & Harvey supplies 12,000 products such as chilled foods and alcohol to 90,000 shops around the country, including large retailers, corner stores and petrol station forecourts.

The business, which was launched in 1925, is owned by current and former employees. It is run by Tony Reed, a former Tesco executive who previously managed the supermarket’s 3,000 convenience stores. Reed became chief executive of Palmer & Harvey last October and is expected to stay on after the rescue deal.