UK: Londis: still waiting for its knight in shining armour (COMMENT)
Given that convenience store retailing is a major growth area, Londis shareholders may be right to hold out for the best offer they can. The Lancelot offer valued Londis at £3m (US$5.5m) more than a recommended offer by Musgrave, but shareholder groups are determined to maximise their returns by recommending the latter.
The rejection of the £63m Lancelot bid comes only a fortnight before a vote is due on a recommended rival offer by Musgrave. Londis, a mutual convenience store chain, wholesaler and distributor, announced it was up for sale earlier this year, and a number of retailers have subsequently expressed an interest in acquiring the chain.
The Lancelot offer failed to convince either the Londis board or the shopkeeper shareholders, with Lancelot's lack of consumer goods wholesale experience seen as a major flaw.
Lancelot is an acquisition vehicle fronted by two former executives of T&S, the corner shop group taken over by Tesco earlier this year. It was backed by the Icelandic bank Kaupthing, and was designed to please those who have campaigned to keep the wholesaler mutual by keeping 60% of the equity with the shareholders. Lancelot would have held the remaining 40% in return for £13,000 cash for each shareholder.
Although the recommended bid by Musgrave, the Irish wholesaler that owns Budgens, valued Londis at £3m less than Lancelot, the terms of the deal would mean that each shareholder receives £31,266 cash. Musgrave's offer will need 75% backing when it is put to an EGM, which is scheduled for 22 June.
Earlier this week two key shareholder action groups, LSAG and Pals, showed their backing for the new Musgrave bid, advising their members to vote in favour of the offer at the EGM.
The value of convenience store food and drink sales is increasing in the UK and across Europe. There is growing desire among consumers for quick and easy retail solutions in an increasingly hectic lifestyle. The rise of on the move consumption, driven by longer working hours and increasing commuter journeys, means that convenience store retailing is set to continue as a growth segment. The rapid expansion of Tesco's Metro and Express formats suggests that whoever acquires Londis will be gaining a lucrative asset.
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