Luke Johnson exploring sale of Gail to recoup Patisserie Valerie position

Entrepreneur Luke Johnson is reviving plans for a sale of his Gail’s Bakery chain months after his investment in Patisserie Valerie erupted into the biggest crisis of his career.

Sky News has learnt that Mr Johnson has begun sounding out bankers about an auction of part or all of Bread Holdings, Gail’s parent company.

Insiders said on Friday that the timing and structure of any sale had yet to be decided, but confirmed that the businessman had decided to explore options for the business.

As well as Gail’s bakeries, which now trades from more than 50 sites, Bread Holdings owns Bread Factory, a wholesale business, and a string of other subsidiaries.

A sale is expected to take place in 2020.

Mr Johnson’s status as one of Britain’s most successful entrepreneurs – with a fortune running into hundreds of millions of pounds – was jeopardised earlier this year after the discovery of a major accounting fraud at Patisserie Holdings, the listed café chain where he had been executive chairman for years.

The crisis, which has prompted a probe by the accounting watchdog and a criminal investigation by the Serious Fraud Office, stunned the City, in part because of Mr Johnson’s reputation as a hands-on manager of the companies he is involved in.

In an article for The Sunday Times, for which he has since resumed writing a weekly business column, Mr Johnson said the discovery of the fraud had devastated him.

“The stress made me physically ill – I suffered a series of debilitating infections and was on antibiotics for weeks,” Mr Johnson wrote.

“I had chronic insomnia and felt exhausted and despairing. I rarely ventured out – I had a paranoid sense that people would be staring at me.

“If I was arrogant at times before, my ego has taken quite a battering since.

“A very public disaster such as this shatters your self-belief.”

Mr Johnson tried to rescue the business by providing a £10m emergency loan to keep it out of administration, but the deepening scale of the crisis led to it collapsing in February.

The company has since been broken up and sold to a number of buyers.

The scandal was a rare blot on the copybook of a businessman who had backed restaurant chains including PizzaExpress, Giraffe and Strada, and has built a reputation as one of Britain’s foremost investors in hospitality businesses.

On Friday, Elegant Hotels, a luxury Caribbean hotels group listed on the London stock market that is backed by Mr Johnson, announced a £101m takeover by Marriott International.

Mr Johnson’s Elegant stake is worth more than £10m.

The former Channel 4 chairman, historically a prolific dealmaker, has otherwise been involved in few transactions since the Patisserie Holdings crisis blew up.

Last month, Risk Capital Partners, his private investment vehicle bought All Star Lanes, the chain of ten-pin bowling venues, out of administration.

Mr Johnson’s renewed exploration of a sale of Bread Holdings comes two years after he initiated a previous auction.

At that time, he envisaged using Patisserie Holdings’ listed equity to help finance a merger of the two companies – an option no longer open to him.

The value of Gail’s parent company is unclear, but the most recent accounts – for the year to the end of February 2018 – show pre-tax profit of £1.07m on turnover of £86.4m.

Risk Capital holds a big stake in Bread Holdings, alongside management team members including Tom Molnar, chief executive.

Mr Molnar established the business with Ran Avidan, naming it after Gail Mejia, who was a supplier of premium bread to restaurants.

Its first site selling artisan bread products, hot food and premium coffee opened in Hampstead, north London, in 2005.

Mr Johnson invested in the company in 2011.

Its retail operations are concentrated in affluent London locations with high footfall, and it has further plans to expand both retail and wholesale operations.

Bread Holdings’ success comes at a time when many bakery owners have been struggling with higher input prices exacerbated by the weak pound.

Mr Johnson declined to comment through a spokesman on Friday.