Londis shareholders fear board may steer group towards break-up

Londis shareholders yesterday warned that the convenience store cooperative would break up if the board went forward with a sale of the business.

KPMG, the accountancy firm that has been conducting a strategic review of Londis since late last year, is understood to have recommended selling the chain or merging it with a larger group. It delivered its report on Friday to the non-executive directors of Londis, which is owned by the 2,000 shopkeepers that run its stores.

Adrian Costain, the deputy chairman of the Londis shareholder action group, who is concerned that a move to sell the business would splinter the organisation, said yesterday: "This report could be very divisive and could lead to a break-up of the group.

"Unless KPMG come up with serious recommendations and some very persuasive arguments, then we are in for a turbulent time."

There are a number of bidders already circling Londis, including Big Food Group, which owns the Iceland chain, and Somerfield. Some of the shareholders, however, would like to see Londis pursue an offer with rival distribution network Nisa, through which it could set up a joint venture.

Mr Costain has serious concerns over the KPMG review process, believing it has been skewed towards a sale from the start. Many shareholders are still deeply suspicious of management after it agreed on a £40m takeover by the Irish group Musgrave last year.

The deal collapsed in the wake of bitter opposition to a £20m windfall for its four top executives from lucrative share option packages. Individual shareholders would have received only £10,000.

KPMG's corporate finance team is handling the bid process already under way, and shareholders believe there is a conflict of interest between the firm's divisions.

The strategic review is likely to argue that Londis cannot survive in an increasingly competitive convenience store market. Tesco, J Sainsbury and Marks & Spencer have all rushed to open city centre outlets. Sainsbury recently signed a deal with Bells, a North-east chain, and Tesco last month paid £53.7m for Adminstore, owner of Cullens Europa and Harts. A flotation of the business was also considered, but this is thought to be too difficult.

If the board does proceed with KPMG's recommendations, it would then have to secure 75 per cent support from shareholders.