Booker to buy two store chains
The country's largest cash and carry chain is to buy Londis and Budgens in a £40 million deal to boost its scale amid the ongoing supermarket price war.
Booker, which operates more than 172 wholesale outlets and supplies over 129,000 independent retailers, is to buy the supermarket brands in the UK from Irish food wholesaler Musgrave Group.
Booker said the deal will upgrade the efficiency of the two brands' supply chains, amid changes in the grocery industry which have seen intense price cutting due to the growth of discounters Aldi and Lidl.
Londis operates 1,630 convenience stores, and made sales in the year to December of £504 million. Budgens is a franchised chain of grocery stores, with 167 outlets that racked up sales of £329 million last year.
Musgrave Retail Partners GB Limited, the unit that held the brands for parent firm Musgrave, posted sales of £833 million in the year to December, and made an operating loss before exceptional items of £7.4 million.
Booker said the Londis and Budgens brand names will remain, and will sit alongside its own retail brands, Premier and Family Shopper.
Booker 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."
Booker said completion of the deal is 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 comes as Booker announced its full-year results.
Booker boosted its annual like-for-like sales by 2.3% as pre-tax profits lifted 12% to £117.7 million, with revenues rising among catering and independent retailing customers. Total sales lifted 1.5% to £4.8 billion.
The group said same store sales among catering customers lifted 2%, though it added that during the year it saw significant price deflation in this sector. It said like-for-like sales among retailer customers rose 2.7%.
Shares in Booker jumped 11% after the announcement of the Londis and Budgens acquisitions and full-year results.
The group said trading in the first seven weeks of the new financial year is 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 said it would return £62 million to shareholders in the form of a 3.5p a share capital return, following the successful integration of the cash and carry firm Makro it bought in 2012 for £140 million. Booker made another 3.5p a share capital return in July last year as a result of the purchase.