Depots: 2 Turnover: £132.3m Sales growth year-on-year: 88.5% Type of operation: Online delivered wholesaler





At Key Lekkerland's annual supplier conference three weeks ago Blueheath's CEO Mark Aylwin told delegates that times were changing for the struggling online delivered wholesaler. Few could have predicted the magnitude of what was on the cards.

This week Blueheath, which currently boasts a £132.3m turnover, made the shock announcement that it plans to acquire cash & carry group Booker in a reverse takeover. The unusual deal, which is subject to shareholder approval, will see Blueheath buy the entire issued share capital of Giant ­Topco Ltd, the ultimate holding company of the Booker Group, through the issue of 1.34bn new ordinary shares in Blueheath.

Booker will control 90% of the enlarged business and will be re-established as a public ­company.

Renamed Booker Group, the company will have estimated annual sales of more than £3bn and be the UK's largest food wholesaler, combining Booker's scale, customer base, catering expertise, coverage and brands with Blueheath's technology and delivery expertise.

"A combined Booker/Blueheath will be able to offer retailers and caterers an unrivalled service of national delivery, 'top-up' delivery and cash and carry," says Charles Wilson, current CEO of Booker, who will head up the new group.

Aylwin, meanwhile, will become managing director of the delivered wholesale business, a role similar to his current position at Blueheath. "We want to be a national delivered wholesaler," he says. "This deal puts us exactly where we have always wanted to be."

The move makes sense for both parties, according to the pair. Booker is the UK's second-biggest wholesaler and last year reported sales of £3.04bn. However, it has admitted to certain weaknesses in its delivered grocery offering and technology, and Blueheath's expertise in this area makes it an attractive bedfellow.

"Booker looked at the current trends in the market and saw that delivered wholesale offered the fastest growth opportunity," says Wilson. "This deal will give Booker the ability to become the only provider of national delivery and top-up of fresh, frozen and ambient foods, alcohol and non-food in the UK."

Blueheath, too, stands to gain. Last year the company struggled with operating inefficiencies and recorded a pre-tax loss of £4.9m on sales of £132.3m.

However, Blueheath has strengthened its position over the past six months following a strategic review late last year, led by Aylwin, who joined the group last September.

It has since made annualised cost savings of £3.1m and margin improvements worth more than £500,000 and expects to break even by July this year.

As managing director of the delivered wholesale business, Aylwin will continue its focus on the delivery side of the business and on sharpening its online offer. He also intends to capitalise on the growth in broadband technology and the number of retailers connected to the internet.

"When the company was launched, our service was revolutionary but the technology was not good enough," he says. "Now, technology has come of age and there is a real opportunity to push the online side of the business again with broadband."

Blueheath recently combined its online strengths with the traditional delivered wholesale model of CTM Wholesale, the Wrexham-based business it acquired in April 2005. This is an approach Aylwin says will continue after completion of the deal.

The companies will also work together to guarantee strong availability, something that Blueheath has started to tackle over the past six months. Availability has risen from a low of 65% at its Thurrock plant six months ago to an average of 98%. Some national accounts have even hit 100% in recent weeks.

Booker is also looking to improve its availability as part of its recovery strategy, which is now in full swing. It has depots in Hatfield and Haydock in England and Livingston in Scotland, and currently supplies cash and carries. But it says it also has the capacity to handle retail delivery.

Both men are convinced the deal with reap further benefits, including improved cash management, buying power and logistics efficiency. The first test will be how independent retailers respond to the new model.