10.03.09 LEES MAY SUE OVER SALE OF FAILED PATISSERIE

LeesFoods is threatening to take legal action against the businessmen who sold it a loss-making bakery firm it has been forced to put into administration.

The maker of the iconic macaroon bars made the threat after calling the administrators to Patisserie UK, which Lees acquired 18 months ago. Twenty-three jobs were lost as a result of the move into administration.

Lees chairman Raymond Miquel yesterday revealed that after taking legal advice, the firm had served notice of a claim "under the warranties contained within the acquisition agreement" between it and Rock Cake, the company from which Lees bought Patisserie.

Miquel yesterday confirmed the vendors of Patisserie who face the prospect of legal action included John Roden, the managing director of the business, and Ian McMillan, its operations director.

In a statement to the stock market Lees said Patisserie lost a significant part of its business from its biggest customer, Costa Coffee, only three weeks after the deal was completed.

By the end of the year, Patisserie had lost all of the business, after Costa Coffee switched completely to new suppliers, plunging Patisserie into the red.

At the time of the acquisition, the Costa Coffee business represented 75 per cent of Patisserie's turnover.

In the statement, Lees revealed that Patisserie UK made a £20.8K loss in 2008. It was making a pre-tax profit of £420,000 on sales of £3.5m and net assets of £471,000 when Lees bought it.

In an update to the market on its 2008 figures in February, the company said Patisserie's performance was "disappointing" and that the directors were "considering its future position".

Patisserie UK was created as a result of a management buy-out from Enterprise Foods, led by Roden, McMillan and non-executive director Ian Steven in February 2006.

Both Roden and McMillan stayed on to run Patisserie after the Lees acquisition. Roden resigned at the end of December after Costa had dropped the company as a supplier.

Miquel denied Roden's departure was a result of the possible legal action, saying the group's decision to make claims against the vendors occurred after he left.

Patisserie has retained 18 staff and administrator David Hunter of Campbell Dallas is trying to sell the business as a going concern, but says "it will be difficult, to be honest".

Miquel confirmed that the other parts of Lees Foods business - which makes macaroons and coconut-covered Snowballs - were enjoying record sales.

Roden declined to comment yesterday.

Less Foods shares were down 10 per cent to 108.5p on the news.

Publication: The Scotsman
Date: Tuesday 10th March