Outlook: Booker should play hard to get

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The Independent Online
BOOKER, THE gently wasting away cash-and-carry business, has probably never felt so wanted. After years of criticism as the company ricocheted from one disaster to another, it suddenly finds itself the subject of a three-way tug of love.

First Somerfield sidles up and proposes a merger. Then Budgens starts whispering sweet nothings, though it is too shy formally to declare its intentions. And of course there are the inevitable financial buyers waiting in the wings.

Booker may wonder why everyone suddenly wants to come a-courting. Somerfield wants to steamroller the deal through as quickly as possible. Somerfield's David Simons wants to fold Booker's buying power into his own as quickly as possible, so as to gain the benefit and keep up the momentum he has already established with the Kwik Save takeover. Unfortunately, it is offering only a no-premium merger similar to the Kwik Save transaction.

The Budgens approach may be even less promising, though we have not yet heard the terms. With less than pounds 400m of sales, the benefits of joint buying would be less impressive. The main asset it would bring to the party would be its management team. John von Spreckelsen has certainly done a good job at Budgens, but a reverse takeover would seem a rather elaborate and costly way for Booker to secure his services.

The problem for shareholders in Booker and its would-be predators is that these approaches are likely to be all-share deals at little or no premium. So they are a gamble on management's ability to make the deal work. Booker is under intense pressure to walk down the aisle with someone, even if neither prospective groom is entirely appropriate. It has no chief executive, and its corner shop customers are going out of business like there's no tomorrow.

Even so, the Booker board should be careful not to sell itself short. Its supplier base is a valuable asset and its distribution chain is just about to start throwing off cash after years of investment. That might make an attractive proposition for a financial buyer in a position to pay a premium and in cash. In this market, that would be preferable to almost any bidder's paper. So, while it is nice to be popular, Booker should not be surrendering to the first gentleman caller who drops by.