Geest plc has officially announced its intentions to finalise a deal that would combine initially the current import activity of its own Asda-dedicated EVS, and the business of Thames Fruit Ltd, an exclusive importer of citrus fruits and melons for Asda. The purpose in creating NewCo - the venture's holding name - is to simplify the supply chain for imported produce to Asda.
Geest has also outlined the make-up of the new company. Geest would take a 76 per cent share of NewCo and Emilio Teresa, the owner of Thames Fruit Ltd, would hold the remaining 24 per cent. Geest would not transfer any assets to NewCo and the estimated value of assets transferring from Thames Fruit Ltd is £1 million. In terms of sales, £65m of Geest's turnover (approximately 50 per cent of EVS's turnover) and £60m of Thames Fruit Ltd's turnover would be affected. Currently, both parties trade as principals.
Through a supply contract with Asda, NewCo would become its agent for imported produce and therefore the turnover definition would change. Consequently, NewCo is expected to report an estimated annualised service income of some £29m and an annualised profit before tax of £1.6m in its first year of operation.
The agreement is expected to be finalised in January 2004 and NewCo to become operational in the second half of 2004. NewCo would operate from two sites in Yorkshire and Kent and EVS would continue to supply Asda separately with produce sourced from the domestic market.
Should Asda wish to terminate the supply contract, it would give two years' notice to buy out NewCo at net asset value and assume all employee responsibilities.
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