Budgens owner expands UK foothold
year, the rest of the UK retail sector has been somewhat
overlooked. But there has been plenty of activity over the last few
months, in particular in the convenience store sector.
This activity has either involved the major players increasing their presence in this sector - such as Tesco buying T&S or Sainsbury expanding its Local format onto Shell petrol station forecourts - or existing convenience store operators developing their businesses - such as Co-op buying Alldays or Budgens revamping its Express banner and rebranding it as Quickstop.
The latest move in this market also concerns Budgens, or rather the chain's Irish owner Musgrave, which yesterday announced a €57 million offer for Londis, one of the leading symbol store groups in the UK.
The Londis board has agreed the takeover bid, which will be voted on by shareholders at an emergency general meeting on 30 December, according to Musgrave. If the deal is accepted, the Irish firm would take control of the company by the end of January 2004.
Like Musgrave, Londis does not own its own stores but rather provides central purchasing and distribution facilities for more than 2,200 members, all of whom are independent store owners. It operates four different store formats - convenience, neighbourhood, supermarket and forecourt - depending on the location of the outlet.
Londis sales last year were around €1.4 billion.
Musgrave said that the Londis name would be retained if the deal is approved by shareholders, and that it would continue to trade independently from Budgens.
If the proposed deal goes through, the Londis name will be retained alongside Musgraves other British operation, Budgens.
However, there are likely to be purchasing, retail development and other synergies between the two UK companies. "The Londis business bears a striking resemblance to Musgrave in terms of retail formats, franchise models and management culture," said Musgrave chairman Hugh Mackeown.
Musgrave's move to increase its presence in the British market is a sensible one, according to Bryan Roberts, analyst at M+M Planet Retail.
"Londis is a good fit for Musgrave, as it dovetails neatly with its franchise and symbol group operations in Ireland," Roberts told FoodandDrinkEurope.com. "Its expertise with Centra and Super Valu should bode well for the already successful Londis, which is progressing well with developments such as forecourt retailing and outperforming its peers in sales and membership growth."
Moreover, Musgrave has avoided the pitfall of overpaying for a bigger slice of the dynamic UK market. "At less than €60 million, the acquisition is a shrewd one and will add around €1.5 billion in retail sales to the Musgrave empire. This will undoubtedly give the combined group greater clout with suppliers and potentially significant synergies in distribution," Roberts said.
"What it also throws up is an interesting prospect for the growth of Budgens' franchised stores - the acquisition of Londis could provide over 2,000 independent shopkeepers who might be interested in converting to the Budgens concept." At present, Budgens has around 227 stores.
The Londis business in the UK is different from that of the same name in Ireland, although both operate along much the same lines. The Irish chain of around 120 stores is owned by a group called ADM Londis, which Musgrave has also tried unsuccessfully to buy in the past.
