Allied-Lyons buys Augustus Barnett chain: Acquisition for pounds 40m poses new challenge to supermarkets in battle for off-licence trade

ALLIED-LYONS, the drinks, food and retailing group, yesterday stepped up its efforts to become a leading force in the off-licence market with the acquisition of the Augustus Barnett chain from Bass, the brewing company, for pounds 40m.

The deal, which has been expected for some time, will add 550 shops to Allied's existing chain of about 960 Victoria Wine outlets. That will boost its share of the take-home drinks market to about 9 per cent, similar to Tesco and J Sainsbury, the supermarket groups. And it puts them just behind Whitbread's Thresher chain, which increased its share to about 10 per cent with the purchase of Peter Dominic from Grand Metropolitan two years ago.

Malcolm Wright, corporate and finance director of Allied-Lyons, said: 'The deal gives us the Augustus Barnett chain, which was the only really large chain left on the marketplace. It puts us on to parity with Threshers, and geographically it is a good fit.' He added that the increase in the size of the chain would help it to compete with the big supermarket groups.

The purchase will, however, mean the loss of about 130 jobs from the Augustus Barnett headquarters in Burton-on-Trent, which will close as administration is transferred to Victoria Wine's headquarters in Woking. Mr Wright said as many staff as possible would be offered alternative posts.

He added that there was little overlap between the two chains, so there should be few shop closures. Both have outlets across the country, but Victoria Wine is stronger in the South while Augustus Barnett is one of the leading off-licences in the North-west and Scotland.

Allied is still considering whether to convert the new shops to the Victoria Wine name. 'We are thinking that there could be a role for the Augustus Barnett name in segmented areas,' Mr Wright said.

Neither Bass nor Allied-Lyons would give details of Augustus Barnett's performance, although Bass said it was profitable. A spokesman added that the sale would enhance its earnings in the current year. There will, however, be a small loss on the disposal because of goodwill previously written off.

Sales at Victoria Wine grew 6 per cent last year and Allied is confident that it can boost Augustus Barnett's business by improving marketing. 'It has not achieved the throughputs we have achieved, and it concentrates more on beers while Victoria Wine is more broadly spread,' Mr Wright said. Bass will continue to supply its beers to both chains.

Sales through off-licences are among the fastest-growing in the drinks industry and account for 20 per cent of beer sales, compared with 10 per cent 10 years ago. More than half of purchases are made through the supermarket chains, which have been expanding both the range and the amount of space devoted to alcohol in recent years.

Allied-Lyons is keen to expand its chain further, both through organic growth and by acquisition.

Allied's shares rose 2p to 577p while Bass's closed down 2p at 403p.

(Photograph omitted)