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Symbolic deal

01 May, 2004
Positive reaction from Londis forecourt retailers likely to profit from latest bid by the Musgrave group
Page 14 
A straw poll of Londis petrol retailers has revealed a positive reaction to the latest developments in the symbol group saga, in which Budgens owner Musgrave has upped its bid by 50 per cent.
The future of Londis has been in the spotlight since Musgrave bid £40m for the group last December (see righthand panel), and triggered national press headlines as details of the somewhat scandalous deal emerged. Then it was back to the drawing board.However the latest offer has been recommended to retailers and is likely to be agreed following a shareholder vote.About 250 of the 2,300 Londis stores are on forecourts. By signing up to Londis, retailers are not only saved from time-wasting trips to the cash and carry, but they benefit from bulk buying as well as retail expertise in growing their businesses – everything from store development to merchandising and marketing.Paul Sykes, owner of Shaw Petroleum, which operates five BP forecourts with Londis shops, said: “I am pleased with the outcome. I think that Budgens were the better people to buy Londis than, say, Iceland. I’m sure Budgens will be a good link because it is a similar type of company, and with its expertise in retail it will be able to offer guidance and support, which will be of great benefit to our businesses.“In that sense it is a very good fit and opens up lots of opportunities for both sides to do better. It’s nice to see Londis has come to a quick conclusion rather than dragging it out any longer.”Walter Bryson, owner of a Londis forecourt in Prestwick, Scotland, agreed that being bought by Musgrave would be the favoured option. “The best move for Londis is to be sold and become part of a bigger organisation, which will allow us to better compete with the supermarkets. With the likes of Tesco and Marks & Spencer getting into convenience retailing, being part of a billion pound organisation will hopefully give us better trading terms to compete with them.”As part of the deal, Londis retailers will each receive more than £30,000 for their share in the symbol group. But while retailers accept that the cash payment is an attractive offer, Musgrave’s long-term trading terms will determine how profitable the proposition will be for them.“The cash payment is very attractive but how good the deal is really comes down to long-term trading terms from Musgrave,” said Bryson. “The payment has to be tied into trading terms so it’s too early yet to say whether it’s a good offer – it won’t be a good deal if the terms are worse.”While it is unclear what will happen to the Londis brand if the Musgrave proposal is accepted, speculation among retailers has already begun. “I think we will start seeing changes after a year – then we will begin to see the Londis brand go,” said Sykes. “That would be my best guess – but we’ve had no information yet.” Bryson, meanwhile, said that he believes retailers will retain the Londis branding for the foreseeable future. “I would like to keep the Londis brand as long as I can,” he said. “Londis is a growing brand in the Scotland area, and I’ve only been with Londis for a year and a half so I wouldn’t want to change yet. Customers don’t like change – they want to see some continuity and stability. “But if in the long term it is right to rebrand, then I have no problem with moving to the Budgens – it still sends out the right messages to customers – although it is not very well known in Scotland.”And it’s this lack of a national profile that retailers believe will need to be addressed quickly through an effective nationwide marketing campaign.“Londis has a good image in the north but customers have no perception of Budgens here, which opens up all sorts of opportunities for the brand, especially in how it presents Budgens in this area,” said Sykes.“But I think that is interesting rather than worrying because in parts of the country where Budgens is well known, it is perceived as a good brand to have on sites. It will all depend on how it is marketed, but I think Budgens has some work to do to convince a lot of Londis retailers that they are theright partner and for them not to look elsewhere.”Bryson agreed that how successful Budgens would be will depend on its marketing approach. “But if it changes the branding, it’s not as if it’ll just be one or two sites, it will be the whole network and presumably it will be looking to develop those stores and bring in new retailers,” he said. “It think it will be a rapid change and become fairly well recognised quite quickly.”A date for the shareholder vote is yet to be finalised but if 75 per cent are in favour of the Musgrave deal, Londis retailers’ first call of duty will be to cash that cheque at the bank.



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