Britain’s biggest cash-and-carry chain is to swallow retailers Londis and Budgens in a £40 million deal to boost its scale amid the ongoing supermarket price war.
Booker, which operates more than 170 wholesale outlets and supplies some 129,000 independent retailers, is to buy the supermarket brands in the UK from Irish food wholesaler Musgrave Group.
This transaction should strengthen Bookers retailersCharles Wilson
The deal will upgrade the efficiency of the two brands’ supply chains, Booker said, amid changes in the grocery industry which have seen intense price cutting due to the growth of German-owned discounters Aldi and Lidl.
Londis operates 1,630 convenience stores, and made sales in the year to December of £504m. Budgens is a franchised chain of grocery stores, with 167 outlets that racked up sales of £329m last year.
Musgrave Retail Partners GB, the unit that held the brands for parent firm Musgrave, posted sales of £833m in the year to December, and made an operating loss before exceptional items of £7.4m.
Booker said the Londis and Budgens brand names will remain, and will sit alongside its own retail brands, Premier and Family Shopper.
Chief executive Charles Wilson said: “Booker, Londis and Budgens are joining forces to help independent retailers prosper throughout Great Britain.
“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.”
The cash-and-carry giant said completion of the deal was conditional on the approval of the Competition and Markets Authority.
It added that it expects the acquisition will be earnings neutral in the first complete year of ownership and earnings enhancing after that.
The move came as Booker said it had boosted its annual like-for-like sales by 2.3 per cent as pre-tax profits lifted 12 per cent to £117.7m, with revenues rising among catering and independent retailing customers. Total sales lifted 1.5 per cent to £4.8 billion.
The group said trading in the first seven weeks of the new financial year was ahead of the same period 12 months ago, but added that the challenging consumer environment will persist with the UK’s food market remaining very competitive.
Booker is to return £62m to shareholders in the form of a 3.5p-a-share capital return, following the successful integration of the Makro chain it bought in 2012 for £140m. Booker made another 3.5p-a-share capital return last July as a result of the purchase.
Analysts at Investec Securities, reiterated their “buy” rating, noting: “The top line environment remains challenging, but the group will keep tight control of costs and we feel there is scope to increase our forecasts on this basis.”