Booker confirms Budgens talks

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The Independent Online
BOOKER, the struggling cash-and-carry chain, confirmed yesterday that it is in merger talks with the Budgens supermarket group.

The news pushed shares in both companies lower as analysts criticised the logic of the deal.

The all-share merger, which could be announced early next week, would be a reverse takeover, with Booker buying Budgens and Budgens' chief executive, John von Spreckelsen, emerging as head of the enlarged business.

Budgens expects to complete its due diligence by Thursday, when Booker announces its half-year results.

Booker shares fell nearly 10 per cent to 170p as analysts said the commercial benefits of the merger were unclear. Budgens shares edged a penny lower to 75.25p.

The City was also critical of Booker's plans to merge with Somerfield before those plans were abandoned last week. Most said the Budgens deal had even less merit.

"Booker must be pretty desperate to be considering this. There cannot be any other offer on the table," one analyst said. Another commented: "At least Somerfield brought scale (in the form of pounds 6bn of buying power). This deal does not even have that."

Booker denied weekend speculation that it is danger of breaching its banking covenants, and it is thought that Budgens advisers, Deutsche Morgan Grenfell, have not found a "black hole" in the company's accounts.

However, some analysts remained pessimistic about Booker's finances. "A merger would seem like the only way out for Booker. They have got to the point where trading has become so critical they do not really have an alternative." said Credit Lyonnais analyst Sally Jones.

"I would not be surprised if they had breached their banking covenants." she added.

Analysts said Booker's corner shop customers would be unhappy with the deal as they would be relying on supplies from a cash-and-carry group effectively owned by a key high-street competitor.

When Somerfield broke off talks with Booker last month, a potential backlash from Booker's corner-shop customers was cited as one of the reasons.

Analysts said the merger was an expensive way for Booker to find a new chief executive.

Booker denied that the job had been offered to Andrew Rolfe, 32, a Booker director who left to become chief executive of the Pret a Manger sandwich chain last week.

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