Costcutter's future within buying group Nisa-Today's appears to have been secured by the deal with Bibby Line. Bibby Distribution has provided Nisa-Today's logistics for the past 22 years and so has a longstanding relationship with the buying group. This should stand Bibby Line in good stead as it now holds a 51% stake in a group that accounts for more than half the goods that go through Nisa-Today's central distribution. Costcutter chairman Colin Graves and his management team will continue to operate the business, with three directors from Bibby set to join the board of directors. Graves insists this means it's business as usual. But Costcutter business has been anything but normal since the £100m refinancing deal with Icelandic investment bank Kaupthing last March. That deal gave the serial investor a 20% stake. The Bibby shareholding includes that 20% previously held by Kaupthing. The bank, which has also backed UK companies including Somerfield, Booker and Karen Millen in recent years, has chosen to end its involvement with Costcutter less than a year after the proposed merger between Costcutter and Nisa-Today's was derailed by rebel Nisa shareholders. Since then both Graves and Nisa-Today's chief executive Neil Turton have been adamant that there would be no resurrection of the merger proposals - although some Nisa members believed plans were still afoot behind the scenes. And although Nisa-Today's is not directly involved in this new deal, it will have champagne corks popping at its Scunthorpe head office. While proposing the merger, both Nisa and Costcutter spoke about the efficiencies a merger would bring and the cost savings these would produce. However outside commentators believed that at the heart of the deal was a desire to tie Costcutter, Nisa's largest member by some distance, into a long-term secure future. Losing Costcutter in the same way as previous large members Jacksons and Bells, which both sold out to Sainsbury's, was a major cause for concern for Nisa-Today's. While this deal comes with no guarantees for Nisa, it increases the likelihood of Costcutter remaining a key part of the buying group beyond the remaining eight years of its current contract. "Nisa-Today's will be unaffected by this deal," says Neil Turton. "But we are delighted to see that the announcement states that the investment by Bibby Line in Costcutter represents a strengthening of the contract with Nisa-Today's from all shareholders." Graves claims Nisa-Today's would be happy with the deal. "Bibby is a well-run family-owned business that is making a long-term investment. I'm sure they will be delighted at Nisa when you think we could have sold to a trade competitor or someone who may sell it quickly." He indicated that Bibby was a more comfortable bedfellow than the more speculative Kaupthing. "We have, like Nisa, worked with Bibby for a long time and there are a lot of synergies with the two companies." Graves said in July that Kaupthing would not be satisfied with a 20% stake in the company in its present form. This was believed at the time to be a pointer to potential acquisitions in the future rather than to a desire to cash in on its investment. On top of all this, Costcutter has had to defend itself from two major attempts to poach its retailers. Firstly the NMA encouraged Costcutter members to switch from Costcutter to Nisa in a bid to make a merger pointless. Then Select & Save offered Costcutter retailers a £50,000 sweetener. Despite this, Costcutter had added 130 new independents by February this year compared with 2006, taking the number of its symbol stores to 1,500 with a group turnover of £452.2m. It also won the contract to supply FreshXpress, the company that emerged from the collapse of Kwik Save. So what next for Costcutter? It seems the Bibby deal got Graves in an acquisitive mood. "We are looking at ways of expanding the business," he says. The Grocer understands Costcutter is keen to snap up the 40-strong mini symbol group Redorange, which is based in East Anglia. "We are looking at a lot of things," says Graves. "Bibby will certainly want to help us grow the business. The money is certainly there if we want to expand." nKEY FACTS The background Costcutter was founded in 1986 by current executive chairman Colin Graves. The c-store chain and symbol operator became a member of buying group Nisa-Today's a year later. The group Today Costcutter is by far Nisa-Today's biggest retail member. It has 124 company-owned stores and supplies 1,500 independents operating under the Costcutter fascia. This, says Graves, adds up to more than 50% of the goods currently going through Nisa-Today's central distribution. It has eight years to run on a 10-year membership deal with the buying group. The controversy Last May Costcutter and Nisa-Today's agreed to a merger funded by Icelandic investment bank Kaupthing, which earlier took a 20% stake in Costcutter. Project Tomorrow would have resulted in the Costcutter chairman fulfilling the same role at the new company. Before members of Nisa-Today's could vote, the deal was scuppered when the Nisa Members Association made allegations of cartel behaviour by Nisa-Today's and Costcutter to the OFT. The complaint was eventually thrown out, but it is believed Kaupthing got cold feet over the potentially crippling liability the new company would face should charges have stuck.

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