Booker has agreed to purchase Londis and Budgens in a £40m deal in what it says is a deal that will see the companies “join forces” to help independent retailers.
The move has been welcomed by former Londis Scotland Director Brian McCaughey, now a Londis retailer himself. McCaughey left his role with the company around a year ago to take over the Londis store in Inveraray with his family and says he can “only see positives” coming from the deal.
“It has been a really closely guarded secret,” he told SLR. “I was at the Londis conference just a couple of weeks ago and there was no hint about it. I know that discussions have been going on in one way or another between Musgrave and Booker for years, but it’s interesting to hear it’s a done deal.”
Booker has signed a sale and purchase agreement to acquire the entire issued share capital of Musgrave Retail Partners GB, which comprises the Londis and Budgens businesses in Great Britain for £40m (net of cash balances being acquired) to be satisfied in cash at Completion.
The deal will have to be approved by the Competition & Markets Authority.
McCaughey believes the deal makes a lot of sense but warns that Booker must retain the Londis and Budgens brands.
He said: “I’m very open minded about but you’ve got to give Booker credit for what they’ve achieved in the last five years or so. As long as they retain the Londis and Budgens brands I can only see positives coming from this agreement. The massive buying power that Booker enjoys has got to be a great thing to tap into so I can’t see too many downsides.”
The Scottish Grocers’ Federation has also welcomed the news. Chief Executive Pete Cheema said: “This is a bold and visionary move by Booker and its Chief Executive Charles Wilson. We believe this will help to strengthen the independent convenience store sector as it faces increasing pressures from both the ongoing supermarket price war and the expansion of the discounters.”
In a statement Booker said that by joining forces with Londis and Budgens “we will help independent retailers and consumers throughout Great Britain”.
Following Completion, Booker’s aim is to further develop the Budgens and Londis brands alongside Premier and Family Shopper, Booker’s retail brands.
The current supply chain will be used for delivery to Booker retail customers. Budgens and Londis customers will retain their brands, which Bookers says will help improve the choice offered by the retailers to the consumer. “The increased scale and operational efficiency should help lower prices, and retailers will benefit from a better delivery and cash and carry service,” said Booker. “This will help independents prosper amid the changes that are occurring in the grocery market.”
Booker and Musgrave are also developing a strategic partnership agreement to facilitate opportunities and the sharing of competencies between the two groups.
Commenting on the proposed transaction, Charles Wilson, Chief Executive of Booker, said: “This transaction should strengthen Londis, Budgens, Premier, Family Shopper and other Booker retailers, through improving choice, prices and service to consumers. Overall it will help independent retailers prosper.”
Speaking of the acquisition Wilson said that there was a lot of history between the two firms – with Booker having owned Budgens for 30 years until 1986. Having initially spoken to the company about working closer together several years ago, Wilson said Booker opened talks earlier in 2015.
He added: “It’s fair to say Musgrave has been struggling for a bit. And it’s been making operating losses for a few years, but among that estate is a first class supply chain and some really good retailers. At Booker, we’ve got a track record of turning around businesses that aren’t in a great shape and we’re committed to growing Budgens and Londis alongside Premier and Family Shopper.”
Wilson also revealed that there could be potential to expand the Family Shopper brand in Londis outlets, which he said could benefit from the strength of the brand, while Premier retailers would be able to benefit from Londis’ fresh offer.