One assumes that there will be some serious discussions and number-crunching going on down at the Musgrave head office in Cork over the next few weeks. Hugh Mackeown and Seamus Scally have until September to decide whether to make Musgraves biggest corporate move since it bought most of the Wellworth stores in Northern Ireland from Fitzwilton four years ago.
When Musgrave bought a 28 per cent stake in the British regional supermarket chain Budgens last year from the German distributor REWE, it also bought loan stock, which can convert into enough ordinary shares to take its stake up to 43.5 per cent.
That conversion option first opens for Musgrave in September, but any increase in its stake to 43.5 per cent will force Musgrave into making a mandatory offer for the remaining shares. Even for a company of Musgrave's size and cash flow, buying out the remaining 56.5 per cent of Budgens could cost it more than £150 million sterling (€247 million), given the suggestions that it might have to offer 120p a share.
The alternatives, of course, are to get a "whitewash" from the Takeover Panel, sell enough
ordinary shares after the conversion to keep its stake below 29.9 per cent, or else postpone exercising the conversion options. Musgrave can convert that loan stock any September between now and 2003 so there is no pressure to make an immediate decision.
Still, the very fact that Musgrave spent more than £115 million sterling last year on REWE's shares and loan stock suggests that the Cork group looks on Budgens as more than an investment.
And given Budgens' aggressive expansion plans, the earlier that Musgrave makes a move, the cheaper it might be to take full control of the British group. Budgens chief executive Martin Hyson has admitted frankly that he has no idea what Musgrave's plans are come September, but it is generally agreed that Musgrave will not make any move without the support of the Budgens' board.
Relations between Musgrave and Budgens are good, with Seamus Scally and Eoin McGettigan on the Budgens' board. Budgens has also adopted much of the Musgrave trading style and its plans for a franchised chain of 50 stores this year is largely based on Musgrave's successful Centra and SuperValu formula in Ireland.
In the past week, Budgens has produced mightily impressive results for the year to the end of April and has shown that a medium-sized multiple based on small stores can mix it with the likes of Wal-Mart, Tesco, Safeway and Sainsbury. Most of Budgens' stores are similar to SuperValu stores in Ireland, while Budgens' convenience stores are more akin to Centra.
The scope for growth in the UK is huge, with independents like Budgens having only 9 per cent of the market compared to the 25 per cent that independents like Musgrave, Spar and Mace have in the Irish market. Even a small increase in market share could have a huge impact on Budgens' business and that is undoubtedly the attraction of the British group for Musgrave.
The prospect of spending a lot of money on bidding for Budgens would no doubt reopen the periodic speculation on Musgrave forsaking its much-cherished private status for a stock market listing. Musgrave is the next best thing to a plc in terms of its corporate behaviour - publicly-disclosed annual results, etc - but the extended Musgrave family has in the past treated the idea of going public with horror.
Hugh Mackeown once entertained a Checkout magazine conference when he ripped up a Warburg report on the Irish retail industry that tipped Musgrave as likely to float on the market. But if Musgrave has eyes for Budgens then that attitude may need to change.
Now that Fran Rooney has exited Baltimore for pastures new, the future of the company lies in the hands of Paul Sanders. And there is every expectation that the finance director and acting chief executive will adopt an aggressive approach when it comes to reducing Baltimore's costs to a level more in line with its reducing income stream.
But no matter how successful Mr Sanders is in cutting Baltimore's costs, there is almost unanimous agreement that at some stage in the next six to nine months Baltimore will have to find more money. The only question is where does it go for funds.
Forget borrowing - it seems that companies in Baltimore's perilous position could not even get money through a junk bond 15 percentage points over LIBOR. A trade sale is a possibility, but surely a trade buyer would simply wait until Baltimore runs out of money before pouncing.
So what about a share issue? Some analysts in Dublin have dismissed the prospect out of hand, but there is one group (Davy's Barry Dixon and ABN's Jemma Houlihan) who do not believe that the idea is so farfetched.
There is one large institutional shareholder in Baltimore, Capital, which has a lot to lose if Baltimore goes under. So it is possible that Capital and some other institutional shareholders might underwrite a relatively modest - say £25£30 million sterling (€41-€49 million) - open offer and placing that would tide Baltimore over until it is actually earning some money.
Capital, which owns 11.5 per cent, would have to write off an awful lot of money if Baltimore went under. So pumping in another few million might be the lesser of two evils for the San Francisco fund manager.
At the age of 60, Ray McLoughlin is either very brave or very foolhardy in his sole management buyout of James Crean. Current Account has been a long-time critic of the Crean boss, but the fact that he is prepared to take such a huge financial risk to offer shareholders a way out of the company is to his credit.
It is ominous, however, that three other directors - Martin Delaney, Joe O'Sullivan and Alastair (Masstock) McGuckian - first indicated an interest in backing a MBO but then decided to stay clear and left the running to Ray McLoughlin on his own. One can only assume that they felt the financial risk was too high.
The trading statement that went with last week's announcement of Ray McLoughlin's planned buyout made shocking reading, without a chink of light to suggest that the company's fortunes can be turned around. Crean will write off €20 million in respect of last year, and it has been in breach of its banking covenants for several months.
Crean shareholders have reason to be angry at the way the company has been run in recent years. But unlike chairmen/chief executives who do not like to share their shareholders' pain (which golf-crazy tax-exile chief executive could we possibly be thinking about?), Ray McLoughlin has at least put his money where his mouth is and put money into Crean shares.
Two years ago, he spent €2.06 million (£1.7 million) on two million Crean shares. Those shares are now worth less than a quarter of what he paid for them!
