It has always been a source of sorrow to the Irish investment community that, with the exception of Arnotts, the stock market presents not a single opportunity to invest in the Irish food retailing industry.
Sure, one can invest in Tesco for an indirect exposure to the market, but otherwise food retailing is controlled by three family-owned groups, Dunnes, Superquinn and Musgrave, who for the present at least seem determined to retain their independence as private companies. It is no understatement to say that investors would lap up an opportunity to put money into a Musgrave plc, but there seems little prospect of that.
Musgrave chairman Hugh Mackeown has always taken the view that Musgrave did not need the nuisance value of outside shareholders, and certainly when he and chief executive Seamas Scally have built up a company with sales of well over £1 billion (€1.27 billion) without need of equity capital, there is no compelling argument for the extended Musgrave family to give up its cherished privacy.
Over the past year, Musgrave has expanded its network aggressively (one has only to open one's eyes to see the proliferation of SuperValu and Centra stores, not to mention the ever-expanding chain of archrival Spar) and is now half way through a £125 million investment which will see more than 100 new SuperValu and Centras. The target is to boost Musgrave's share of the food retail market to well over 20 per cent. All this is being done without any equity funding.
No doubt Musgrave's 1998 results will show some increase on the £36 million debt at the end of 1997, but with interest rates so low and with the 1997 debt representing gearing of more than 50 per cent, the group has a balance sheet which can comfortably accommodate its expansion programme. The next phase of this is potential acquisitions in Poland and Britain. "We may behave like a public company in certain ways, but we are absolutely committed to remaining a private company," Hugh Mackeown said a few months ago. There is no reason to believe that policy has changed. Behaving like a public company has meant publishing annual results, detailed statements on acquisitions (and alliances like the one with Roches) and regular appearances in the media (like marketing manager Ann Dunphy's presentation to the Marketing Institute this week).
If one didn't know Hugh Mackeown's avowed aversion to outside shareholders, one might suspect that Musgrave was gearing up for a flotation. Unfortunately for investors, that prospect is probably as far off as it ever was.
