Musgrave to sell 172 UK Budgen stores to franchisees

Musgrave is planning to franchise out 172 outlets in the Budgen's convenience store chain it owns in the UK, the company said yesterday.

The Cork-based grocery distributor and franchisor announced that it was going to seek independent retailers to take ownership of the 172 stores it owns in the 232-strong chain. The remaining 60 shops are already owned by franchisees.

Musgrave Group managing director Mr Séamus Scally said yesterday that the move was in keeping with its long-term strategy for the British chain. The Irish company had always planned to franchise out stores that it owns.

"We are not interested in ownership," Mr Scally explained. "The decision to franchise is consistent with our established policy of being a supporter of independent retailers rather than being an owner."

Mr Scally said he was not in a position to say how much the family-controlled group would make from selling the stores to franchisees. He pointed out that some were held on leases and others were freehold, while the individual outlets varied in size.

He added that the stores would be sold on a "case-by-case" basis to the most suitable candidates rather than simply to the highest bidder. The process will be completed by 2007.

The stores will retain the Budgen's brand. Musgrave will supply a high proportion of their grocery stocks, as well as providing support with management, storage and store development.

The British convenience store market is not as advanced as it is in Ireland, according to Mr Scally.

"We conducted significant consumer research and people told us that they want local shops with a good range, particularly fresh fruit and vegetables." He added that 42 per cent of British towns did not have their own grocery stores.

Musgrave bought Budgen's plc in two stages, in 2000 and 2002, for a total of £417.5 million sterling. It bought 28 per cent of the company and a tranche of convertible loan stock for £147 million from German operator Rewe. This effectively brought its stake to 45 per cent in 2000. It paid £207.5 million for the remaining 55 per cent in mid 2002, after which the company delisted from the London Stock Exchange.

Musgrave is one of a number of bidders in the running for Londis, the mutually owned UK chain. It had to abort its €57 million bid for the chain late last year amid a row over the fact that Londis's executive directors would have received €28.5 million, while its 2,000-plus shopkeeper shareholders would have received just €14,400 each.

That division of the price was based on Londis's agreement with its executives. They have since waived their rights under this deal. Any offer approved by the board and consultants KPMG is scheduled to be put to Londis shareholders next month.

In Ireland, Musgrave plans to open 12 SuperValu franchises this year, including four flagship stores in Dublin. SuperValu turns over €1.6 billion a-year.