Patisserie Valerie rescued by deal with Causeway Capital after accounting scandal

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Patisserie Valerie was rescued by Irish private-equity firm Causeway Capital Partners after an accounting scandal pushed the U.K. cake baker into insolvency.

Causeway Capital struck a deal for the assets and business of the cafe chain’s parent Patisserie Holdings Plc, according to a statement. Causeway Capital and the bakery chain’s new management, led by Chief Executive Officer Steve Francis, funded the transaction.

Patisserie Valerie, a well-known fixture on Britain’s shopping streets, attracted the likes of British sportswear billionaire Mike Ashley. The deal announced Thursday will save about 2,000 jobs and keep 96 cafes open, a boon for downtown districts stricken by the shift to online shopping and uncertainty over Brexit.

The cafe group’s collapse in late January after more than 90 years in business followed an investigation that revealed thousands of false entries in its accounts and resulted in 920 employees losing their jobs. The company was unable to raise money or pay its debts, failing in a last-ditch bid to raise new funding from its lenders, which include HSBC Holdings Plc and Barclays Plc. KPMG has been handling the sale process.

Francis, formerly CEO at British food producer Tulip Ltd., joined late last year after the scandal erupted. The deal leaves no role for Patisserie Valerie’s chairman and largest shareholder Luke Johnson. The U.K. entrepreneur attempted to rescue the company after news of the scandal, lending it 20 million pounds ($26 million) in October and another 3 million pounds last month to pay January wages.

Causeway Capital usually invests between 2.5 million euros ($2.8 million) and 10 million euros in Irish and U.K. small and medium enterprises. Among its investments is Bakers + Baristas, a coffee chain with 60 locations in the U.K. and Ireland.

Among other potential bidders, Carlyle Group LP’s special situations unit was weighing an offer for the cafe chain, according to the Wall Street Journal. Ashley’s Sports Direct International Plc withdrew a bid over the weekend after offering in excess of 15 million pounds, the Financial Times reported.

KPMG, the company’s administrator, also announced it sold the Philpotts chain of 21 stores owned by Patisserie Valerie to A.F. Blakemore & Son. The firm said the two transactions mean that 117 shops and 2,000 jobs were preserved.

Patisserie said the total consideration of the two sales was 13 million pounds, adding that it’s received interest as well for the Baker and Spice brand.

— With assistance from Peter Flanagan

Bloomberg News
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