The four executives of Londis UK have removed a potential obstacle to a renewed Musgrave offer for the group by surrendering their rights under a deal giving them half the proceeds of any sale.
Londis revealed yesterday that it was paying the four executives a total of £2 million sterling (€3 million) to extinguish their rights under a share-option agreement giving them 51 per cent of the company.
That agreement, made in December 2002, ultimately derailed Musgrave's €57 million bid late last year. Under its terms, the four executives - chief executive Mr Graham White, Mr Andrew Wallace, Mr Terry Bedford and Ms Denise Buller - were entitled to €28.5 million of the sale price, while the group's 2,000 shopkeeper shareholders would have received just over €14,000 each.
The shareholders approved the original share-option agreement.
A row over the option agreement prompted an offer from the British-based Big Food Group (BFG), which held out more favourable terms to the shareholders.
In response, the Londis board withdrew its support for the Musgrave bid and hired KPMG Corporate Finance to carry out a review of the options facing the Londis UK group.
KPMG last month recommended a sale of the group, and it has since begun talks with a number of interested parties, including the Irish grocery franchiser and distributor Musgrave.
Neither Londis nor the Irish company will comment on the negotiations.
However, it is understood that the talks will continue for a further three to four weeks, when whatever preferred bidders are chosen by the Londis board will begin due diligence of the company, and an offer will then be put to the shareholders. It is thought there are up to nine other potential bidders for the group, including BFG, Somerfield and Nisa.
The deal with the executives will knock €3 million off the sale price. However, any renewed offers on the same scale as last December's Musgrave bid would mean that more than €50 million would be divided between the 2,000 shareholders.
When the Musgrave's bid was aborted last December, the executives signalled their willingness to forego their rights to 51 per cent of the company. A Londis statement yesterday said that the group's independent directors had decided that an immediate cash payment to extinguish the 2002 option deed would be in the shareholders' best interest. Under its terms, they will no longer manage the company but will remain in consultancy roles in the near term.
From the point of view of Musgrave's and other potential buyers, the deal announced yesterday eliminates any risk of another row over the executives' rights affecting the outcome of a new bid.
Londis UK had sales last year of €770 million and operating profits of €5.5 million. Its net assets stood at €32.8 million.
