Gadget Shop shareholder row threatens future of high street chain

The future of The Gadget Shop and its 700 staff was uncertain last night as the company headed towards administration after a dispute between its shareholders.

The future of The Gadget Shop and its 700 staff was uncertain last night as the company headed towards administration after a dispute between its shareholders.

It is understood that talks to sell the business, which has suffered adecline in sales in the past few months, collapsed after two shareholders controlling 40 per cent of the company blocked the plans.

The sale talks were led by Chris Gorman, the executive chairman of the company and a 25 per cent shareholder. Tom Hunter, the retailing entrepreneur who also owns 25 per cent of The Gadget Shop, supported him. Jonathan Elvidge, who founded the company in 1991 and has a 10 per cent shareholding, also backed Mr Gorman.

But sources close to the situation say two other shareholders - John Wood, a City trader, and Peter Wilkinson, the founder of Freeserve - rejected Mr Gorman's plans and scuppered the takeover talks.

The bidder walked away, fearing it would not gain control of the company and would become embroiled in a battle between shareholders.

The directors of The Gadget Shop say there is no option for the company but to go into administration. A spokesman for The Gadget Shop said: "It is extremely regrettable that The Gadget Shop has to be put into administration by [tomorrow]. Chris Gorman's No 1 concern is for the staff of the company and he will be working hard with the administrators to find a buyer, with the aim of keeping The Gadget Shop going and saving the jobs of the staff."

PKF, the accountants, are being lined up to act as administrators.

While trading has been poor, The Gadget Shop is thought to have relatively small debts, of about £3m. Mr Gorman bought a stake in the business in 2002 in a deal reported to be worth about £15m. His personal loss is about £400,000.

Mr Wood declined to comment on the situation and Mr Wilkinson could not be reached for comment.

Trading in the gadget and novelty gifts sector has become fiercely competitive as general retailers, such as toy stores and department chains, offer similar stock. John Caudwell, of the Phones4U chain, closed his Must Have It gadget stores in January after disappointing trading over Christmas.