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Crunch time: Maplin in talks to sell the business

Pre-pack administration looms if retailer can't find a new parent

Ailing gadget souk Maplin is locked in eleventh-hour talks with a potential buyer of the chain but the company may be placed into the hands of an administrator if an agreement cannot be reached.

Private equity owner Rutland Partner, which bought Maplin for £85m in 2014, is understood to be negotiating with interested parties including Edinburgh Woollen Mill, according to Sky. PWC is managing the process, we are told.

The clock is ticking for the British electronics retailer as Rutland is keen to offload the company as soon as possible, maybe by the end of this week. A pre-pack administration is one potential scenario should a trade sale not be concluded.

“We are in advanced talks with a number of parties and expect to be in a position to announce a solvent sale to the business within days,” a spokesman for Maplin told The Register.

“Once secured this will stabilise the business to the benefit of all stakeholders and provide Maplin with the financial firepower to deliver its 2020 multichannel strategy focused on smart tech,” he added.

The direction of travel for Maplin has been evident to readers in recent months: numerous credit insurers, including QBE and Euler Hermes, that were nervous about its financial results and business profile withdrew credit insurance, this meant the end of a trading relationship with Tech Data, the UK’s largest tech distributor.

El Reg understands that all of the major creditor insurers have now entirely cut cover for Maplin, with Atradius the last to talk. Some smaller credit insurers may still have the appetite to write lines for the retailers, we were told by a source close to the matter.

The loss of this indemnification - the same thing that eventually brought down Comet in 2012 - will have drained Maplin’s working capital by forcing it to trade with some suppliers on a cash-only basis.

Insurers were concerned about the High Street overheads Maplin carries with its 211 stores and 2,500 plus employees spread across the UK, in the context of relatively low margins made on the kit and components it sells.

Financial results for the year ended 19 March 2016 showed a sales decline to £234.5m versus £236.23m in the prior year. A loss of the £11.7m was wider than the loss of £6.23m filed in the previous period.

Maplin had downplayed the impact of credit insurance and pointed to the cash the company had generated - £16.26m - in the year, and said it had suppliers willing to support the company through the difficult times.

Should a pre-pack be the outcome, then remaining creditors will likely take a bath, but the new owner could spare the livelihoods of some staff.

A source close to Maplin told us the firm had been cutting costs to improve its margins and was seeking external investment. “Now a solvent sale is the best outcome for all stakeholders… there is no guarantee of a sale”.

“[Maplin management] do need to do something pretty swiftly. [Resolving the situation] by the end of this week it a little dramatic, these things can drag on. But there are some decent proposals on the table and the hope is to have something done in a matter of days,” our insider said.

Christmas was a crunch period for Maplin and we are told that sales over the festive period fell seven per cent on the previous year’s corresponding period.

Rutland paid £85m to buy Maplin from private equity biz Montagu almost four years ago. Montagu paid £244m for Maplin in the noughties. There is little profit to be had in brick and mortar electronics retailing these days. ®

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