Booker snapped up Makro Cash & Carry UK in a cash and shares deal worth £140m this week - securing a tantalising tie-up with Metro Group, the world’s fourth-biggest retailer.
Although Booker’s purchase of loss-making Makro did not come as a surprise, the terms of the deal did raise a few eyebrows.
Booker will pay £15.8m in cash for Makro’s assets, including its 30 depots, while Metro will take a 9.99% stake in Booker, worth £123.9m on 29 May.
Metro will initially hold the stake for a year, but said it wanted to keep its shareholding “beyond the lock-up period, becoming a significant Booker shareholder with the aim of fostering a strategic partnership built on competence sharing to mutual benefit”.
Through the “strategic partnership”, both parties are expected to work together on buying, supply chain management, marketing, own label and customer service “within applicable laws”.
Makro’s UK woes
Makro Self Service Wholesalers, the British arm of Dutch wholesale group SHV, started trading in the UK in May 1971 in Eccles, Manchester.
In 1998, SHV’s Makro division was bought by Metro, which already held a 40% stake. The deal included C&Cs in eight other countries and set Metro back DM4.8bn (£1.6bn).
But more and more rivals started to muscle in on Makro’s patch and in 2007 it posted a £15m loss. Sales slumped from £1.04bn to £924,088.
Turnaround plan followed turnaround plan, but sales still fell.
Midway through 2011, MD Hannes Floto and four other directors left Makro, due to “differing views on the strategic direction of the company”. Turnaround experts from AlixPartners were brought in. They pledged to return Makro to profit by 2013.
Last October, a new board headed by Metro’s Juergen Schwarze was appointed. He embarked on a major store refurbishment plan and restated the focus on HoReCa. But Makro lost £63.2m last year with sales falling to £787.4m.
The deal is expected to open doors for Booker, not just in the UK, but worldwide. Metro Group’s own-label ranges Rioba, Aro, Sigma and HoReCa, which were listed in Makro UK and had a global overhaul in 2009, will be made available to Booker customers.
Booker will also tap into the expertise in Metro’s worldwide business. “Booker serves hundreds of Italian restaurants,” said Booker CEO Charles Wilson. “Makro has a big Italian business. We can work together to offer more.”
There was potential for Booker to expand its India business, he added. “I wouldn’t be surprised if Zunaid [Bangee, Booker India MD] was to sit down with Metro in India to see if there were opportunities in collaborative buying and building the supply chain,” he said.
The deal will also allow Booker to diversify into new areas of wholesale. Makro has a strong fish business and is a big player in non-food - especially electricals and toys. And 963,000 of its 1.1 million customers are SMEs. Booker currently serves just 60,000 SMEs.
Wilson said Booker would retain the Makro name and Booker products would be available in Makro depots.