Managers seek equity partners to buy BWG

Members of the management team at the Spar franchise owner, BWG Holdings, want to strike a partnership deal with a private equity group to buy the business after its majority shareholder Electra Partners sells out, senior market sources said yesterday.

The group has been on the block since it appointed IBI Corporate Finance last month to advise on its strategic options. Valuations in the €300-€400 million range and higher have been mentioned.

While the business is already said to have attracted tentative interest from a number of private equity players in Britain, the identity of those talking to the management figures remains unclear for the moment. The investment house 3i was named by some sources as a possible suitor, although other sources downplayed that group's possible interest. With the sale process still in its early stage, it is believed that 3i itself has yet to declare its hand. It has raised €4.3 billion this summer for a new €5 billion buyout fund so it certainly has money to spend.

A London-based spokeswoman for 3i said it never made any comment on "speculation".

Market sources say the rationale for a tie-up between management and a private equity fund is clear. Led by chief executive Leo Crawford, the management team is more familiar with the business than any other group. Their experience with Electra also proves that they can work effectively with a private equity partner.

As 65 per cent shareholder, Electra set out a five-year investment timeframe in 2002 when it backed a €220 million management buyout of BWG. Mr Crawford's team owns 15 per cent of the business while 20 per cent is in the hands of businessman John Clohisey and other shareholders of Newhill Ltd, whose chain of 115 Spar stores was acquired for €45 million in the 2002 buyout.

Market sources said it was unclear for the moment whether Mr Crawford and Mr Clohisey would combine their interests again. However, they said any management consortium would be looking for significant increase in their stake in the business as part of their price for a partnership deal.

While BWG has been a prime beneficiary of rapid economic growth in recent years - its turnover topped €1 billion for the first time in 2005 - market sources believe its acquisition might offer opportunities for a private equity owner to execute synergies with other retail businesses, possibly in Britain.

For example, BWG already controls Appleby Westwood, owner of 340 franchise Spar stores in southwest England.

As owner of the Spar and Mace brands in Ireland, the group intends to add 39 new Spar outlets and 11 new Mace stores this year, and about 35 Spar stores next year. Its retail network had 428 Spar outlets and 138 Mace stores at the end of 2005, some 140 of which were owned and operated by the business. The remainder are run by franchisees.