‘Betrayal’ warnings as ex-Debenhams owner buys PG Tips

A private equity firm castigated for its role in Debenhams’ collapse has bought PG Tips as part of a multibillion deal.

CVC Capital acquired the clothing giant in 2003 with Merrill Lynch and TPG, which collectively made £1.2 billion in dividends in under three years.

When Debenhams returned to the stock market in 2006, its debt had ballooned from £100 million to over a billion.

Described by one banker as a “bomb waiting to go off”, it folded in December 2020.

READ MORE: US & Asian companies team up in race for PG Tips

Retail expert Richard Hyman told the Guardian at the time that Debenhams was “removed into the bank accounts of private equity investors”.

Following Unilever’s decision to sell its tea division to CVC for £3.8 billion, a trade union has warned of “another case of corporate betrayal”.

Unite has over 300 workers at the PG Tips site in Trafford Park, Manchester, and is seeking a “cast-iron guarantee” that it will stay open.

“The sorry consequences of CVC’s so-called ‘investment’ in Debenhams… are there for all to see with hundreds of shops shut and thousands of jobs gone,” general secretary Sharon Graham said.

“The story of private equity buy-outs in the UK very often has a fatal pattern of debt loading, asset stripping and job cuts as short-term shareholder dividends soar.

“We will not allow another case of corporate betrayal to ruin another iconic product.”

Unite national officer Rhys McCarthy said: “CVC is a company with no track record in this sector and comes with a history of bringing instability and dis-investment to our high street.

“The UK is a nation of tea drinkers and… will expect that UK workers are treated with decency and respect, not trampled over in the stampede for boardroom riches.”

When Big 4 grocer Morrisons was taken over this year, private equity buyer Clayton, Dubilier & Rice issued a series of guarantees on pensions and pay.

CVC has been approached for comment.

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