Iceland pulls in happy shoppers The Grocer predicted months ago that Malcolm Walker might pull off something big but no one suspected merging with Booker. Belinda Gannaway, Tony Hurren and John Wood assess the deal It's business as usual, say Stuart Rose and Malcolm Walker as they prepare to break the corporate ice after their near £1bn merger this week ­ a deal that took the City and the industry with something stronger than shock. Shareholders are promised immediate benefits in earnings enhancement. The two predict annual savings from trading synergies of £50m after a £20m outlay for the merger. Booker customers will see "enhanced ranges and product development which could include Iceland own-brand in the freezer", Rose said. And Iceland shoppers will get a zooped up online offer. But otherwise things will remain pretty much as they are, we're told, with both companies run as separate entities. It will be Iceland plc, but the Booker name and brand will continue. "Virtually no redundancies", no depot disposals, and no head office closure, they promise. Sceptics are not convinced. Are they right? Is it naive to think that once the t's are crossed it will be back to the same old grindstone? Or does this deal change the nature of the Iceland and Booker business irrevocably? There is new management in place for a start. Stuart Rose ­ who cut his corporate teeth at M&S, Burton Group and Argos and is credited with putting Booker back on the road to recovery ­ is no longer Mr Booker plc but Mr Iceland plc. Rose protogé Charles Wilson steps in as chief executive at Booker. And Iceland shareholders will lose their conquering hero Malcolm Walker when he moves into the back seat as non-exec chairman in a year. Booker finance director Steven Glew will also stand down after the merger process is complete. Rose himself said he would have resigned for the sake of the deal ­ some change for a man who last July told The Grocer "I'm not doing what I'm doing to sell the business" ­ but Walker wanted him in on the act. All the same Rose has always been likened to Booker's paramedic and auctioneer. And that's just what he's proved to be. And a richer one at that ­ the deal could be worth as much as £1m to him. So there are new faces on the enlarged Iceland board. But while it may be a meeting of minds around the table, both companies will maintain their independent strategies, it is promised. Iceland will continue to focus on moving beyond its traditional customer base through an intuitive stance on food issues and a national home delivery network. And Booker will drive sales, battle to improve margins and grow its online business. Walker said: "They will remain as two separate and distinctive organisations but will be able to grow quicker together." At the same time, however, Rose and Walker are plotting to energise each company's e-commerce strategies through cross-pollination. The group, they say, "will be strongly placed to exploit the opportunity offered by e-commerce". It will develop Iceland's home shopping offer using Booker's warehouse facilities as collection points for a wider range of products. Booker depots, Rose points out, are within a 15 minute drive of 90% of the population. And Wilson has 2 million sq ft of excess capacity. There are yet no plans for Iceland to use Booker depots as picking centres though a trial could be on the cards. Booker depots are set up for case picking, Rose points out. "Getting that down to consumer purchases hasn't been investigated." Neither is Walker definitively swung by either instore or picking centre fulfilment. Walker added: "The internet will either be smoke and mirrors or a great opportunity. Either way, no one is better placed than us." While some analysts see the e-commerce link as the weakest imperative behind the deal ­ one described it as a "cloak" for the real trading benefits ­ Verdict Research director Mike Godliman believes the deal signals the way things could go in UK grocery retailing. He said: "If home delivery grows to between 3% and 5% of the major multiples' business, they simply don't have the space to handle it from their stores and will be looking for wholesalers with distribution space. "Stuart Rose has done a great job in getting Booker into profit and the merger is good long-term strategy for Iceland and a good, perhaps shorter term, fit for Booker." He believes the merger is designed to combat the home delivery threat of the major multiples, not threaten the livelihood of independent retailers as sceptics suggest. Some voices are saying Booker is intent on ridding itself of its larger and costlier cash and carries which are less suitable for home delivery. The Iceland/Booker deal has left independent retailers with mixed feelings. Some see it as the ultimate price for Booker's ill fated takeover of Nurdin & Peacock and its disastrous move into central distribution. Thousands of small traders have never forgiven Booker for swallowing up Nurdin & Peacock at the end of 1996 at a time when N&P -- itself in some difficulties -- was the darling of the independent sector. Independents feel the wholesaler lost credibility when it allowed its shareholders, manufacturers' representatives and others to shop its warehouses. While private retailers may view Iceland as a competitor, they could back the takeover if the frozen food giant created a sharper pricing policy for small traders. Rose, however, has said the deal will have no impact on prices. So different stakeholders expect different things from the deal, though the deal brokers have been keen to insist it's business as usual. But mergers and takeovers rarely go strictly to plan and the challenge will be keeping the new business moving forward. And a word of caution. Rose is a self confessed better fixer than manager. {{NEWS }}

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