Royal Mail, DX Snubbed City Link Rescue Deal

[koolishy67]

http://news.sky.com/story/1398430/royal ... escue-deal" onclick="window.open(this.href);return false;


Rival parcel delivery groups including Royal Mail and DX were approached about buying City Link's assets, Sky News understands.

The parcel delivery group collapsed into administration on Christmas Eve


By Mark Kleinman, City Editor

Rival delivery companies including Royal Mail were approached about a pre-Christmas rescue of City Link, the parcel services provider which collapsed into administration this week.

Sky News has learnt that Royal Mail and DX Group held preliminary talks in recent weeks with KPMG, which was working for City Link's owner to identify possible buyers of the struggling company.

Royal Mail, which is 30%-owned by the taxpayer, is understood to have been interested in taking on some of City Link's large customer contracts, which include deliveries for high street retailers such as John Lewis and Mothercare.

DX is said by insiders to have held talks about a more comprehensive deal involving City Link's assets, and analysts said they now expected it to attempt to acquire parts of the company out of administration.

Other specialist restructuring firms were also approached about a takeover of City Link, but none of these resulted in concrete discussions about a deal prior to directors appointing EY as administrator after the close of trading on Christmas Eve.


The collapse has sparked controversy, with more than 2,700 jobs directly under threat and a further 1,000 said to be at risk owing to the number of self-employed contractors used by City Link.

The RMT trade union criticised Better Capital, the investment firm which owns City Link, for the timing of the administration, which Sky News revealed on Christmas Day.

But sources close to the situation pointed to an email sent by one RMT official to members on Christmas Eve which said - inaccurately - that the company had already called in administrators that morning.

"This led to increasing pressure on the business and given the level of rumour [there was a] risk of creditor action and thus the company [had to be placed] into administration to give it protection," said an insider.

RMT officials held talks with the administrators on Saturday about a possible rescue, while Vince Cable, the Business Secretary, has agreed to meet the union to discuss the situation in the new year.

A spokesperson for the RMT union said: "A meeting between City Link union RMT and administrators Ernst and Young today has exposed a truly horrific catalogue of mismanagement at the top of the company dating back to November which leaves more than 2,000 staff facing redundancy on new years eve with a skeleton staff kept on for a couple of weeks to wind down the operation."

City Link was acquired by Better Capital, an investment firm headed by Jon Moulton, a leading financier, last year.

Its previous owner, the pest control firm Rentokil, offloaded it for just £1, reflecting the parcel group's long history of losses.

People close to the situation said Better Capital's £40m investment in City Link had been followed by a series of efforts to make it commercially viable, and pointed out that the current shareholder would lose a "significant" sum of money as a result of its collapse.

The scale of possible job losses among City Link's 2,727 employees has not yet been identified, although EY said they were likely to be substantial, with the first round of redundancies expected within days.

A number of staff are being retained to help return parcels to customers and assist with winding down City Link's operations, the administrator said.

Despite the recent explosion in the growth of online shopping, the delivery sector is beset by excess capacity, with companies such as Amazon developing their own delivery services.

Last month, Better Capital wrote down the value of its £40m investment in City Link by 50% and said it was exploring "various options to maximise the value of the (holding)".

In the wake of a £14m loss for the 2013-14 financial year, City Link's owner added that the business had "progressively deviated from its monthly profit budget during its current year to 31 December driving the conclusion that its current structure is unsustainable in the long term".

Better Capital blamed the worsening outlook on "excess (and increasing) capacity in the sector, made worse by customers developing their own delivery capabilities".

The administrators said customers who had handed over parcels to City Link on Christmas Eve should go to a depot to retrieve them on or after December 29.

The company's online parcel tracking system and helpline telephone numbers are again open to enable fulfilment of existing orders.

Royal Mail declined to comment while DX was unavailable.

[NWpostie]

Rentokil got off lightly all things considered, the firm will be asset stripped, vans, scanning machines, buildings will be snapped up, whats left over will be cast aside, directly employed drivers and self employed drivers will be left with nothing. it will be a tough Christmas for many families and the New Year won't exactly be filled with joy. the human side of it, is often ignored in the fire sale.

[SpacePhoenix]

the firm will be asset stripped, vans, scanning machines, buildings will be snapped up,

Depends on what was leased by Citi Link and what was owned by them

[NWpostie]

the firm will be asset stripped, vans, scanning machines, buildings will be snapped up,

Depends on what was leased by Citi Link and what was owned by them

Indeed hired assets will go back to the original owners, what is Citilink owned assets will be determined by the Administrators, it will be a complicated mess, apparently the problem with Citilink has been going back years if this post is anything to go by.
http://www.urban75.org/blog/clueless-ci ... in-the-uk/" onclick="window.open(this.href);return false;

[cloherty1976]

the firm will be asset stripped, vans, scanning machines, buildings will be snapped up,

Depends on what was leased by Citi Link and what was owned by them

Surely if the company has a lot of assets then you would have thought rentokil would have done the same instead of selling for a £1..

[Nigel1505]

Rentokil sold it for a £1 but the buyer would then be liable for the company debts.

[Lounge Lizard]

the firm will be asset stripped, vans, scanning machines, buildings will be snapped up,

Depends on what was leased by Citi Link and what was owned by them

Indeed hired assets will go back to the original owners, what is Citilink owned assets will be determined by the Administrators, it will be a complicated mess, apparently the problem with Citilink has been going back years if this post is anything to go by.
http://www.urban75.org/blog/clueless-ci ... in-the-uk/" onclick="window.open(this.href);return false;

Indeed. "Royal Mail, which is 30%-owned by the taxpayer, is understood to have been interested in taking on some of City Link's large customer contracts", yes, it's the contracts we would want, not the depots, vans, scanners, etc.

[rubberbond]

the firm will be asset stripped, vans, scanning machines, buildings will be snapped up,

Depends on what was leased by Citi Link and what was owned by them

Indeed hired assets will go back to the original owners, what is Citilink owned assets will be determined by the Administrators, it will be a complicated mess, apparently the problem with Citilink has been going back years if this post is anything to go by.
http://www.urban75.org/blog/clueless-ci ... in-the-uk/" onclick="window.open(this.href);return false;

It may be my imagination, or did I hear /read somewhere that the boss of Citi Link ,is an ex senior Royal Mail manager. Poor sods never stood a chance if that is true.

[TrueBlueTerrier]

the firm will be asset stripped, vans, scanning machines, buildings will be snapped up,

Depends on what was leased by Citi Link and what was owned by them

Indeed hired assets will go back to the original owners, what is Citilink owned assets will be determined by the Administrators, it will be a complicated mess, apparently the problem with Citilink has been going back years if this post is anything to go by.
http://www.urban75.org/blog/clueless-ci ... in-the-uk/" onclick="window.open(this.href);return false;

It may be my imagination, or did I hear /read somewhere that the boss of Citi Link ,is an ex senior Royal Mail manager. Poor sods never stood a chance if that is true.

No he is a Capitalist Vulture but your statement is just reinforced in this case

- Jon Moulton (born 15 October 1950) is a British venture capitalist. He is the founder and managing partner of the private equity firm Better Capital, and is the former managing partner of the private equity firm Alchemy Partners. Moulton is best known for leading Alchemy Partners' bid to buy MG Rover from BMW in 2000, which ultimately lost out to a rival offer from the Phoenix Consortium.

There was post that a DOM had gone over to them, that might be what you remember.

[Gold Fox]

RM should clear Citylink back log ... £1 each item or some thing like that .

[SpacePhoenix]

I wouldn't be surprised if RM had its eye on some City Link depots as some may be in better locations from RMs point of view and may enable them to merge some DOs

[Pompey Boy]

Very sorry to see anyone at City Link or anywhere else losing their job, but why should Royal Mail save them? Just a reminder that POMC is CLOSING next year and jobs will go. We seem to have been forgotten.