Musgrave has been forced to withdraw its £40 million (€57 million) bid for the Londis symbol group in Britain after the Londis board said it would no longer recommend it.
The reversal came as the board said it would open its books to all parties interested in buying the firm, subject to confidentiality agreements.
This decision was pre-empted by news on Thursday that rival player, The Big Food Group (BFG), was prepared to bid for Londis if the Musgrave offer was rejected. BFG said yesterday it had not yet received "an invitation" from Londis to participate in a sale process. The "alternative proposal" presented by BFG on Thursday was similar in value to Musgrave's bid, but offered to double the return of small shareholders to £20,300, while cutting the share due to four directors from £20.2 million to £600,000.
The perceived inequity in the Musgrave offer has generated much disquiet among small Londis shareholders this week, with some reported to be seeking support for an e.g.m. aimed at ousting the four directors in question. The legal structure in place at Londis means the directors, who recently shared £7.1 million after renegotiating their contracts, will own 51 per cent of the firm, if it is being acquired.
This situation appears unlikely to change, but there are indications that the four directors may now be prepared to accept less from a buyer than their level of ownership would merit on paper.
In an apparent effort to appease small Londis shareholders, Musgrave stated last night it had not had the chance to negotiate the legal arrangements of the Londis executive team during the "lengthy discussions" that had led to an offer being made.
Musgrave was until yesterday bound by a confidentiality agreement that meant it could not contact Londis shareholders after its offer document had been sent.
The Cork-based group reiterated its view that a bid of £40 million placed "fair value" on Londis, but went on to say it was "ready and very willing" to explore a reformulated offer that would be acceptable to all parties. This does not necessarily mean Musgrave is prepared to offer more for Londis, but it may suggest a reapportionment of the proceeds could be considered. Until now, the firm had seen this as an internal matter for Londis.
Musgrave said it had first been approached by Londis at the start of this year and had expected to complete a deal by September, "well in advance of the busy Christmas period". This appears to refute suggestions that the transaction was being rushed through during the busiest trading period of the year for Londis shopkeepers.
