Londis shareholders wooed with letters from Iceland

Frozen food retailer the Big Food Group yesterday stepped up its battle for the Londis chain of convenience stores by urging shareholders to back its takeover approach.

Iceland owner BFG has written to the nearly 2,000 shopkeepers who jointly own the co-operative, laying out the advantages of joining forces. A source said the letter argued that Londis shopkeepers would benefit from being part of a bigger group, given "the very competitive retail environment out there". Other points raised include BFG's strengths in product development, its national logistics network and ability to offer Londis shareholders "better value" when sourcing products.

BFG said last month it wanted to pay £40m for the co-operative. Its approach followed one from the Irish owner of Budgens, Musgrave, which also offered £40m but included a controversial payout to four directors of £20m.

Londis had initially accepted the Musgrave offer but the proposed directors' payout caused outrage among shopkeepers. The management therefore withdrew its support and, following a heated annual general meeting last week, agreed to abandon the directors' option scheme.

Londis has also asked KPMG Corporate Finance to evaluate the business and, should a sale get its approval, hold an auction. It has told Londis it will produce a list of strategic options within two months.

But BFG is continuing to target shareholders directly. As well as this weekend's letter, it has already written to the shopkeepers explaining how they would receive more money under its bid. Its chief executive, Bill Grimsey, has telephoned them directly to argue his case.

Mr Grimsey is also scheduled to meet with KPMG and is expected to hold a series of roadshows targeting shareholders. A BFG source said the group was keen to make a formal offer, adding: "We would like to do it at the earliest opportunity."

Musgrave has withdrawn its offer for Londis but is understood to be preparing a fresh approach. Other interested parties are thought to include the Co-operative Group.