9:29 am, August 4, 2024
Cazoo directors tried and failed to sell the broken online used car sales business in a desperate attempt to stop it falling into administration – before the brand was eventually sold to Motors.
A report from joint administrators Teneo says that between December 2023 and February of this year, Cazoo directors attempted to find buyers for different parts of the group.
Following the failed online used car dealer’s pivot to become a second hand car advertising platform, the administrators approached 64 parties – 16 trade buyers and 48 financial institutions – which led to 23 of them expressing an interest.
All signed NDAs and were shown the details which led to three offers – but the winning bidder changed its terms at the last minute.
A second sales process was then initiated which eventually saw Motors secure a deal to buy the Cazoo website and IP in a deal that looks to have been worth £5m.
Administrators have booked £2.63m in its report for the ‘sale of the brand and technology’ with a further £2.4m payment to follow.
The report from Teneo, filed at Companies House on Friday and just processed, said: ‘The Joint Administrators have realised £2.6m in respect of intangible assets.
‘A further deferred consideration element of £2.4m is anticipated to be released in six months, subject to certain conditions being met. This deferred consideration is being held in escrow.’
It is not clear in the report exactly how much of those funds can be attributed to the Motors acquisition, but it looks likely the advertising website paid £5m for the Cazoo brand.
Motors has been contacted for comment.
The report says Cazoo – now officially renamed by administrators as CHL 1 Realisations Limited – owes £259m to a total of 10,107 creditors after it fell into administration.
‘This does not capture a number of other unsecured creditors,’ said the report.
‘Consequently, the total value of unsecured claims in each of the companies could be materially higher once these other liabilities have been quantified and included.’
Other assets of the business have been sold off to a variety of parties.
This included a deal for the Thurleigh prep centre, as well as the customer collection sites in Birmingham and Bristol, which were sold to Constellation Automotive Group for £676,000. This deal included 23 staff transferring over on May 20.
Deals for the customer centres in Northampton and Manchester were also negotiated with Constellation but stalled as the landlords were slow to reassign the leases. This deal was completed in mid-June for £161,000.
Constellation has already put up Cinch signs at the Northampton store (above) after making a u-turn on its online only sales model.
Administrators said Cazoo’s property arm held leases for 13 sites, including offices in London and Southampton. Deals have now been done to exit all of them, bar one.
Administrators blamed ‘rising interest rates’ and its ‘impact on consumer spending power’ as the cause of a ‘slowdown’ in used car sales, which ultimately led to Cazoo’s demise.
The creditors report pointed out Cazoo made a huge loss of £329m in 2021, a figure that had tripled on the £103m loss it made in 2020.
Cazoo was launched by Alex Chesterman (pictured top) – the founder of Zoopla and LoveFilm – in 2019, but never made a profit. He stepped down, along with four other directors, in 2023.
The report added: ‘The rapid growth strategy involved substantial investments in marketing including sponsorship arrangements with football teams and sporting events, and high-end logistics and car reconditioning facilities.
‘While this approach aimed to capture market share quickly, the associated costs outpaced revenue generation, resulting in substantial losses.
‘In addition, supply chain issues limited new car production in 2022, which increased used car prices. This made it challenging for the group to acquire inventory at prices which allowed for profitable margins.’
The administrators explained that G3 Motor Auctions has been helping auction off the used car stock left in the business which had a value of £335,000. So far, £126,000 has been received.
G3 bought Cazoo’s Bedford site and has already turned it into an auction. That deal saw 28 employees transfer across.
However, despite the deals, the report points out that some 700 Cazoo staff were made redundant in the first quarter of 2024.
Administrators believe there will be ‘sufficient funds’ to enable a ‘distribution’ to Cazoo’s unsecured creditors, but it is ‘heavily dependent on whether claims are received from secured creditors’.
Cazoo Investigation
Teneo said it will also – as part of its duties – be carrying out an investigation into the running of the business.
It said: ‘This initial assessment includes enquiries into any potential claims that may be brought against parties either connected to or who have had past dealings with the companies.
‘In addition, we are required to consider the conduct of the directors and any person we consider to have acted as a shadow or de facto director in relation to their management of the affairs of the companies and the causes of failure.
‘We will submit a confidential report to the Insolvency Service, a division of the Department for Business, Energy and Industrial Strategy.
‘If you have any information that you feel we should know, please contact us.’
Cazoo customer claims
The administrators also explained that anyone who bought a car from Cazoo may be entitled to submit a claim as an unsecured creditor too.
Any Cazoo customer who has bought a car and experienced problems with it that were present at the time of purchase or during the free warranty period can submit a claim, they explained.
Teneo added: ‘Customers who purchased their vehicle on finance continue to benefit from Satisfactory Quality provisions within their finance agreements and should reach out to the lender if they are experiencing any issues.
‘Customers who purchased a service plan through the group will also be entitled to submit a claim as an unsecured creditor in the administration for the full cost paid towards the service plan (either though an upfront payment or monthly instalments), less 12 months’ of equivalent cost for each service and MOT received under the scheme.’
Teneo said all known customers had been contacted by email and post with details on how to submit a claim. For further details they can contact [email protected].
The full report on the meeting with creditors can be found on the Companies House website.
