Musgraves' Londis deal to bring further expansion: ThePost.ie


TCH Archives > Sunday Business Post > 2003/12/14 > Musgraves' Londis deal to bring further expansion

Musgraves' Londis deal to bring further expansion
Sunday, December 14, 2003

By Simon Carswell

Musgraves, the Cork retail giant behind Centra and SuperValu, might be bringing another 2,232 stores under its wing with the proposed purchase of Londis in Britain, but the deal will still only leave it with 7 per cent of the British retail market.

This gives the retailer plenty of room to expand.

The family-owned Musgraves last week revealed that it had offered to buy Londis in Britain, which comprises 1,933 members operating 2,232 stores, for €57 million. The deal, if approved by Londis shareholders on December 30, will add these outlets to the 230 Budgens stores that Musgraves bought in south-east England only 18 months ago.

The British retail market is worth stg»110 billion (e157.8 billion) ayear,while the convenience end of the market is worth about stg»22 billion (e31.4 million). Londis and Budgens' share of this stands at about stg»1.5 billion a year.

Seamus Scally, group managing director at Musgraves, said that even after the deal, the company will still be "a relatively small player" in theBritish conveniencefood market.

"It is a very big market," said Scally. "The independent sector is generally poorly serviced and we see the opportunity to grow that sector. Through time, there will be further opportunity."

Scally said there would not be further acquisitions in Britain for at least a year.

"2004 is very early to make another move in Britain," he said. "We have to use the next 12 to 18 months to get to know the Londis business, and use that time to put in other support structures."

He said Musgraves has no intention of changing the Londis and Budgens brands, as both were "well-recognised" in Britain and the company saw "no overriding need to change that".

Musgraves has complemented its growth in the Irish market by expanding in Britain. Last year its sales increased by 22 per cent to €2.77 billion, while pre-tax profits reached €57.6 million. Its net worth was €216.6 million in 2002.

The company's chain of SuperValu stores has not grown as fast as its smaller Centra shops, as the demand for larger supermarkets in Ireland has eased in recent years, due to market saturation. Britain provides greater scope for more rapid and profitable expansion for Musgraves.

"One of the attractions of Londis is that there is a geographical spread across England, Scotland and Wales, and that complements our foothold in the south-east with Budgens," Scally said.

One retail industry source described the move for Londis in Britain as challenging, and said he thought Musgraves was paying "very little" for the British distribution chain.

Themoveconsolidates Musgraves' position as one of Ireland's largest private companies. Musgraves employs about 28,000 people, directly and indirectly through its 900 franchisees.

Musgraves has 24 per cent market share of the Irish convenience market. Founded in 1876, the company is predominantly owned by Peter and Stuart Musgrave and Hugh McKeown.

Scally said that Musgraves was examining succession issues within the company, but not h i ng i m m e d iat e was planned about passing the company to the next generation in the family.

"The family has structures in place to deal with succession," he said. "They have a family council that links the shareholders together and continues to look after their interests, and that keeps close communication with each other. They look at things like succession within the family."

Scally said the company had no intention of going public. He said being familyowned and family-controlled suited the family-owned and controlled structure of Musgraves' franchisees.

"Musgraves is able to use that strength in taking the long-term view all the time, investing for the long-term, without ever having to look over our shoulder at what outside shareholders or analysts might be thinking," said Scally. "We don't have any of those pressures."