European Bakeries deal investigated

17 August, 2007
Page 4 
Suppliers and creditors have raised serious concerns about London wholesale bakery European Bakeries, which recently spent a week in administration.
European Bakeries, which supplies discounter Aldi and catering giant Compass, through Enterprise Foods, called in administrators Deloitte on June 8. It had debts of over £576,000 at the time, with over 100 creditors owed sums of up to £98,898.Suppliers hit included BFP Wholesale, Maple Leaf Bakery UK and Greens Flour. European blamed the collapse of sandwich chain Benjys, which it supplied, for its financial problems.On June 15 it was sold as a going concern to DM Holdings of which David Merchant is the only director, with Nury Gee listed as company secretary. Administrator Lee Manning of Deloitte has since admitted that "a lot has come to light" since that deal was signed. Following a recent creditors' meeting, he has started an investigation into the relationship between the former European Bakeries and a connected logistics company, Foodchain Distribution.Before it went into administration, European Bakeries was charged a fee by Foodchain, believed to be around £3,000 a week, for daily deliveries to Aldi, although these were made using European Bakeries vehicles, petrol, staff and products.Gerald Waldeck was the largest single shareholder in European Bakeries before it went into administration. He also had a 50% stake in Foodchain.Manning said the findings of Deloitte's confidential report would be relayed to the creditors' committee "in a few months".As well as that, a "considerable amount" was owed to European Bakeries by Foodchain and administrators were seeking to recover these debts, he said.Administrators expect to be able to tell angry creditors within a "few months" how many pence in the pound they will distribute.Meanwhile, various suppliers have queried the suitability of two consultants employed by the new business.The pair, David Gee and Kevin Smedley, are disqualified as serving as company directors until 2019 following a substantial fraud. They were banned following a case brought by finance company GE Commercial Finance when they were found to have provided false information to obtain finance.Damages in excess of £16m were awarded against them personally.The company involved was City Truck Group Ltd, which went into administration in 2002. Gee had been chairman and Smedley group financial director. The two are believed to be planning to appeal against their disqualification.New European Bakeries MD David Merchant told British Baker that David Gee had been working at European Bakeries as a consultant for a year, before Merchant bought the company. Gee will remain with the company for around six months to restructure its sales operation as he had "built up relationships with customers that it was essential were maintained," Merchant said. Consultant accountant Kevin Smedley joined the new company in June as a part-time interim manager in finance and HR for a "couple of months" until a new financial controller was appointed. Gee and Smedley "were not acting as directors", Merchant added.David Gee's wife, Nury Gee, was company secretary until auditors were appointed, he said. She also became company secretary of Foodchain on June 16.The relationship between European Bakeries and Foodchain, which is still trading, had ceased, Merchant emphasised.Merchant said: "I intend to grow European Bakeries and build on its reputation as a quality craft baker." He said he planned to review product range, expanding into different market segments - targeting retail channels. The business's catering services side would be smaller in proportion as the overall company expanded, he said. Investment would be made in its London bakery.



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