John Wood outlines the options that lie ahead for Londis
The Londis board appear to have dampened down some of the fury of their shareholders/retailers by appointing consultant KPMG Corporate Finance to conduct a strategic review. But they may find they have just delayed judgement day.
When Big Food Group announced on December 18 its rival bid to Musgrave’s, the Londis board had to withdraw its support for Musgrave and cancel the egm which would have voted on whether to accept it.
But at the agm on December 30, the directors faced angry questions about the size of the share options awarded to the executive team by the 2002 agm. It was a stormy meeting but it did signal that the most contentious issue, the options on 51% of the shares held by the executive directors, could be up for negotiation.
Non-executive chairman Peter Williams also told the meeting: “I have asked KPMG to discuss with the management the possibility of a revision of terms of members’ options with a view to giving members a larger proportion of the total consideration for Londis than currently envisaged.”
The board reports back to members in the spring and in answer to a shareholder, Williams suggested the directors’ position would be untenable if their proposals were then rejected by shareholders. The KPMG report should also help ordinary members evaluate the different options.
But after the meeting, Adrian Costain, who chairs the Londis Shareholders Action Group, was still not satisfied. He repeated a call for all the non-executive directors to resign, claiming the share options were not in the best interests of Londis shareholders. He also said he wanted KPMG to look at Londis remaining a mutual organisation.
However, he added: “I welcome the interest of Big Food Group and Musgrave in Londis. What we are interested in is the best outcome for shareholders in the long term.”
While Londis has an award-winning supply chain for ambient, Costain identified fresh and chilled as a major weakness. Both Musgrave and Big Food Group could have a role to play here, he suggested, but that did not necessarily mean Londis had to give up its independence.
The situation has been complicated by the emergence of a number of other potential bidders. Nisa-Today’s, with both Londis and Musgrave among its members, is evaluating the situation. Another Nisa member, the Select & Save symbol group, has also said it plans to bid, but as it only has 72 members compared to the 1,900 in Londis, the odds are stacked against it.
The latest company to admit an interest is Big Food Group’s largest rival in the C& C sector, Bestway. With a £1bn turnover, it has the scale, but lacks a fresh and chilled chain. However, it left Landmark at the end of the year which might enable it to strike a deal to use Nisa’s fresh and frozen facilities.
Advisors to Londis admit there have been a number of serious enquiries, but other potential suitors are keeping quiet. Somerfield is a Nisa member, and executive chairman John von Spreckelsen knows Londis well after years on the Nisa board, but the company refused to comment, as did the Co-operative Group.
Delivered wholesaler, P&H McLane would also fit the bill. It got its fingers burned when it took over Mace from Booker in 1999, but in Londis it would be acquiring a symbol group with far firmer foundations. Even arch rival Spar would appear to have the means to mount a bid, but combining the membership of the two groups would be a nightmare.
And membership is the key word whatever the outcome of KPMG’s deliberations. If any Londis members do not like the direction the group takes, there will be a host of other companies only too pleased to welcome them.
The Londis board appear to have dampened down some of the fury of their shareholders/retailers by appointing consultant KPMG Corporate Finance to conduct a strategic review. But they may find they have just delayed judgement day.
When Big Food Group announced on December 18 its rival bid to Musgrave’s, the Londis board had to withdraw its support for Musgrave and cancel the egm which would have voted on whether to accept it.
But at the agm on December 30, the directors faced angry questions about the size of the share options awarded to the executive team by the 2002 agm. It was a stormy meeting but it did signal that the most contentious issue, the options on 51% of the shares held by the executive directors, could be up for negotiation.
Non-executive chairman Peter Williams also told the meeting: “I have asked KPMG to discuss with the management the possibility of a revision of terms of members’ options with a view to giving members a larger proportion of the total consideration for Londis than currently envisaged.”
The board reports back to members in the spring and in answer to a shareholder, Williams suggested the directors’ position would be untenable if their proposals were then rejected by shareholders. The KPMG report should also help ordinary members evaluate the different options.
But after the meeting, Adrian Costain, who chairs the Londis Shareholders Action Group, was still not satisfied. He repeated a call for all the non-executive directors to resign, claiming the share options were not in the best interests of Londis shareholders. He also said he wanted KPMG to look at Londis remaining a mutual organisation.
However, he added: “I welcome the interest of Big Food Group and Musgrave in Londis. What we are interested in is the best outcome for shareholders in the long term.”
While Londis has an award-winning supply chain for ambient, Costain identified fresh and chilled as a major weakness. Both Musgrave and Big Food Group could have a role to play here, he suggested, but that did not necessarily mean Londis had to give up its independence.
The situation has been complicated by the emergence of a number of other potential bidders. Nisa-Today’s, with both Londis and Musgrave among its members, is evaluating the situation. Another Nisa member, the Select & Save symbol group, has also said it plans to bid, but as it only has 72 members compared to the 1,900 in Londis, the odds are stacked against it.
The latest company to admit an interest is Big Food Group’s largest rival in the C& C sector, Bestway. With a £1bn turnover, it has the scale, but lacks a fresh and chilled chain. However, it left Landmark at the end of the year which might enable it to strike a deal to use Nisa’s fresh and frozen facilities.
Advisors to Londis admit there have been a number of serious enquiries, but other potential suitors are keeping quiet. Somerfield is a Nisa member, and executive chairman John von Spreckelsen knows Londis well after years on the Nisa board, but the company refused to comment, as did the Co-operative Group.
Delivered wholesaler, P&H McLane would also fit the bill. It got its fingers burned when it took over Mace from Booker in 1999, but in Londis it would be acquiring a symbol group with far firmer foundations. Even arch rival Spar would appear to have the means to mount a bid, but combining the membership of the two groups would be a nightmare.
And membership is the key word whatever the outcome of KPMG’s deliberations. If any Londis members do not like the direction the group takes, there will be a host of other companies only too pleased to welcome them.
No comments yet