Storm brews over £20m payout for Londis chiefs

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Shareholders in Londis, the convenience store group, yesterday appealed to the company's management team to explore alternatives to the £40m takeover offer from Ireland's Musgrave Group.

Many of the 1,956 individual retailers who own Londis are unhappy about the deal, which would see the group's executive directors net a £20m payout leaving just £10,000 apiece for small shareholders. They are furious at the existence of a lucrative share options scheme that would give four directors control over 51 per cent of the company and half of the cash being offered by Musgrave. Were it not for the scheme, small shareholders would receive £20,000.

Some shareholders are prepared to forfeit their own windfall by voting against the deal later this month, such is the extent of their indignation. Arjan Mehr, who runs a Londis shop in Bracknell, Berkshire, said: "We feel so bitter and angry about the whole thing that we would rather vote down the deal. After that they [the directors] will have to re-evaluate how much they should receive and then maybe we can agree on a different deal."

Shareholders have also complained about the nature of the voting scheme, which affords each Londis member just one vote, regardless of how many shops they own.

They are also upset at the timing of the deal, struck as the shopkeepers prepare for their peak trading period. Mr Mehr said most Londis shareholders would be too busy running their shops to attend the extraordinary meeting, scheduled for 30 December, at which the deal will be voted upon. The deal requires a 75 per cent "yes" vote in order to be approved.

Mr Costain said: "The management is trying to take advantage of the ignorance of the average Londis shopkeeper who is salt of the earth, but not very well versed in the facts."

This seems borne out by a telephone survey conducted by The Independent yesterday, which found that most Londis owners contacted were unaware that Musgrave had even made an offer for the company. "I don't know anything about that, dear," one London-based Londis shareholder said.

Mr Costain, who owns a Londis store in north Liverpool, called for the management team, led by Graham White, to explore alternative takeover deals. "I wonder whether this is the best deal available. I feel the company has been undermanaged recently because the directors have just had an eye on their exit route. We should commission an independent strategic review of the options for the business," he said.

However, observers suggested that it would be hard for shareholders to turn down a £10,000 windfall from the takeover deal, given the alternative of receiving nothing. And even the most irate shareholders acknowledge the benefit of becoming part of a larger group, with all the distribution and buying advantages this would bring.

At issue is an executive share options package that was set up in 1996 to persuade the current management team to stay with the business. Mr White, the chief executive, has options worth more than £6m entitling him to purchase 17 per cent of the company, while Andrew Wallace, the company secretary, and Terry Bedford, the sales director, each have options worth £5m. Denise Buller, the commercial director, would receive £4m.

A Londis spokesman said it would be hard for shareholders to dispute the options package, given they voted by a margin of more than 90 per cent to extend the scheme at last year's annual meeting. "The windfall reflects the value the management team has created in the company during the past 17 years," the spokesman said, adding: "When they arrived, the business was virtually bankrupt."