After several months of rumours and speculation, Grenadier Holdings (formerly Paragon Group) has announced that it will exit the operations of UK and Ireland multichannel operator OT Group (OTG).
OTG was born out of the much-publicised demise of Spicers-OfficeTeam (SPOT) in 2020, with Ireland-based Paragon snapping up the assets for a bargain price of £2 million. A year later, the business acquired the contract operations of Office Depot UK – including its distribution centre in Ashton-under-Lyne, near Manchester – and, in 2022, brought back the Spicers wholesaling name to the UK.
The Paragon Group itself, incidentally, has also undergone something of a transformation. In 2023, it evolved into a series of investment entities under the Grenadier Holdings umbrella. The Paragon name was reserved for the Paragon Customer Communications unit, which was rebranded to simply Paragon, and the Paragon ID subsidiary. OTG’s ownership was transferred into an entity called GIML Investments 4.
New start
There had been high hopes that Grenadier, with its successful track record of never having had a business fail, would inject a new lease of life into OTG. Indeed, it had lofty ambitions of more than doubling the business products group’s annual revenue to £350 million by 2025. It backed up this goal with the acquisition of Office Depot and investing around £2 million in OfficeTeam’s SmartPad online purchasing solution.
Unfortunately, profitable growth remained elusive. Matters were not helped by a painful move to a new ERP system in late 2022/early 2023 and an ill-fated decision to invest in troubled dealer services group Nectere – which collapsed into insolvency at the beginning of this year (read All that glitters).
With what surely must have been a considerable strain on OTG’s finances and cash flow, it was an open secret in our industry that the group was extremely slow at paying suppliers, with many manufacturers putting the company on hold. This type of situation, of course, can lead to a vicious circle of even further cash pressures and a drop-off in service levels due to lower product availability.
Out in the cold
One criticism – justifiably – levelled at OTG during the Nectere crisis was the absence of proper communication with stakeholders, including Nectere’s dealers themselves.
It was a question of history repeating itself in the lead-up to the official announcement in early August. Despite Spicers paying lip service to a “promise of transparency” via a handful of Q&A sessions on LinkedIn dubbed ‘Quick Fire Friday’, suppliers and the wider trade were once again left in the dark.
Eventually, in a 2 August 2024 letter, OTG CEO Andrew Jones confirmed the fate of the business. He said the decision had been made after a “sustained period of difficult trading conditions”, which he blamed on external factors.
He stated: “The company has recently completed a comprehensive review of operations in the UK and Irish markets. [This was] prompted by the lower demand for general office supplies resulting from new working practices and low office occupancy rates, which have not been restored to pre-COVID levels.”
Jones added: “The company does not expect office occupancy rates to increase significantly in the foreseeable future and has also concluded the current oversupply of warehousing and distribution facilities in the UK office supplies market is not sustainable.”
As a result, the decision was made to offload certain trade and assets. Office Depot UK & Ireland and the Officeteam business are set to be sold to Grenadier sister company Paragon. Product supply and distribution services will be provided via a third-party logistics model under a long-term contract with VOW, which has also purchased the 5 Star brand. The Spicers wholesaling business will be wound down “solvently”, while the distribution centre in Ashton-under-Lyne will be closed “in the next few months”.
High hopes
In order for the process to take place in a “managed and orderly manner”, OTG’s directors intend to use a company voluntary arrangement (CVA) as a mechanism to “facilitate the payments to creditors”. While the CVA is being arranged, a moratorium period will run until approximately 2 September.
Vendors that got hit when SPOT went under will undoubtedly be interested to learn that OTG “intends to ensure all suppliers receive arrears in full on reconciled and agreed balances”. The latter said its shareholders are “providing a substantial financial contribution to ensure that any loss to suppliers is mitigated”.
This would seem to imply there will be some losses involved and it remains to be seen what “agreed balances” actually means. However, there is clearly an effort being made by Grenadier to ensure suppliers which stood by OTG following SPOT’s collapse and the demise of Nectere do not get burned a third time.
“We are committed to handling the transition process with transparency, fairness and respect,” said an OTG spokesperson in August. “We will now be entering a period of orderly and professional dialogue with colleagues, customers and suppliers alike in order to effect as smooth a transition as possible.”
Picking up the pieces
If we can talk about a ‘winner’ from this situation, it would appear to be evo. VOW has picked up both Office Depot and Officeteam as customers and the group now owns the 5 Star brand.
These outcomes raise questions, however. Firstly, Office Depot and Officeteam are being serviced by a sister company of direct competitors Banner and Staples.co.uk. Is that a long-term, viable solution? And do these businesses really belong with Paragon?
Secondly, what will VOW do with 5 Star, the former Spicers own brand? It has already made several hundred lines available; will it take a more aggressive approach to a brand it has actual ownership of? If so, what could be the longer-term ramifications for Q-Connect?
These questions will no doubt be answered in due course. Meanwhile, there is the caveat that – as the September issue of Workplace360 went to press – the CVA still has to be approved by 75% of OTG’s creditors.
One must assume the required backing has been given, otherwise it is unlikely the moratorium period would have been granted. It’s a sad end to OTG’s four-year journey, but as one supplier told W360: “It could have been worse.”
