Musgrave is promising to boost Londis’ chilled, fresh and frozen goods facilities should it eventually take control says John Wood

Musgrave moved quickly to reassure Londis retailers after the Londis board announced that it was its preferred bidder for the group.
The Irish distribution giant, which claims a 25% share of the food market in Ireland in addition to owning Budgens in the UK, promised Londis members that it would be investing in facilities to further improve their already award-winning logistics.
A top request by Londis members when they were surveyed earlier this year was improvements to supplies of chilled, fresh and frozen goods.
With Londis members still to vote on whether to accept the deal, Musgrave UK executive chairman Eoin McGettigan does not want to appear to be prejudging their decision, but he says improving those facilities would be a priority.
He points out: “Budgens is recognised for the chilled and fresh range that it offers and its expertise in delivering to smaller stores.”
He says it’s too early to say what approach would be adopted with Londis.
Options include extending the Londis RDCs, using Budgens’ facilities, or even making use of Nisa’s chilled and frozen distribution service (Musgrave and Londis are both members of Nisa’s Central Buying Company), but he adds: “We have a track record of building and running our own facilities.”
Another prime concern of Londis retailers revealed by the survey was the cost of goods from any new supplier. Some have suggested this could be the Achilles heel of any company bidding to take over Londis, because Londis does have to make a profit from its distribution activities to pay to its owners or shareholders, while any new owner will be seeking to make a profit and to recover the cost of any bid.
McGettigan refutes this saying: “Retailers supplied by us in Ireland and Budgens stores here make a healthy profit.”
He adds: “We are a family-owned company. We don’t have to worry about shareholders and the stock exchange so we can take a long-term view.”
A big change for Londis retailers is they will no longer have seats on the board. There are no plans for any Londis board members to join the Musgrave board, but McGettigan says all the senior executives and the Hampton Hill HQ will be retained to ensure service to the retailers is maintained.
“Retailers will also have a voice in the business through structures not dissimilar to Spar’s guilds,” he says. In Musgrave’s other businesses retailers are elected to regional councils and they can elect members to national councils which play a part in decision making and keeping management in touch with retailer sentiment.
Londis retailers interested in buying any of the Budgens stores Musgrave is selling could also benefit from a tie-up. “They would definitely have preference, if they already had a trading relationship with us,” says McGettigan. “We are looking for quality retailers committed to the independent sector, and they would fit the bill better than somebody we don’t know.”
Presenting the Londis board’s decision to choose Musgrave as preferred bidder, vice chairman Peter McNamara said a higher bid had been received but it chose Musgrave because it was a better strategic fit.
Twenty three expressions of interest were whittled down to three bids in a process managed by KPMG. Unsuccessful bidders are believed to have been The Co-operative Group and Thresher, while Big Food Group, which still says it is interested in acquiring Londis, did not take part in the bidding process claiming Londis and KPMG tried to impose anti-competitive pre-conditions to any participation.
Musgrave will now take part in roadshows presenting the bid to Londis members before they vote on the deal.
If they give it the 75% of votes required, the deal is likely to be completed during the summer.