Musgrave finally wins Budgens for £232m

Budgens succumbed yesterday to a takeover bid from Ireland's largest food and grocery distributor Musgrave that values the supermarket and convenience store operator at £232m.

The agreed deal, worth 135p per Budgens's share, ends months of speculation about when the Irish group, which was Budgens' largest shareholder, would make its move.

Martin Hyson, Budgens's chief executive, said the local food shop chain could "only be strengthened" as part of a larger group. "There will be certain purchasing synergies because the business will have four times the volume, with regard to our ability to buy goods," he said.

The privately owned Musgrave, which operates the SuperValu and Centra brands, will run Budgens as a separate division, keeping the group's 130-year-old name. The existing management team and its 6,000 employees will remain.

Seamus Scally, Musgrave's managing director, said the group had chosen Budgens for its springboard into the UK because it was "the one group that we identify very easily with". Like Budgens, most of Musgrave's stores are small units with an emphasis on providing local neighbourhoods with fresh produce.

Analysts said the takeover would mean little change to how Budgens was run. "They are very close in management and retail philosophy," one said.

About 25 per cent of Budgens' shareholders have agreed to accept the bid, which will be funded by debt. Musgrave already owns a 28 per cent stake, which it bought for £89.4m from ReWe, the German food group, in August 2000.

Mr Hyson said Budgens would remain focused on opening stores in small towns and large villages, which he described as the group's "biggest opportunity". He added: "There is no sign whatsoever that majors will move into those areas." Britain's largest supermarket groups such as Tesco and J Sainsbury have been expanding the number of smaller stores they operate in recent months but these are mainly in city centre locations.

Budgens, which operates about 230 supermarkets and convenience stores in the South of England, said it would retain its current expansion plan of opening 15 to 20 new stores each year.

Mr Hyson admitted the group had spoken to other potential suitors but said the Musgrave offer was the best. "Who they were and when they were I'm not prepared to say," he said. Musgrave's offer represents a 19 per cent premium to Budgens' closing share price on 9 May, the day before the company revealed that the Irish group had made an approach.

Musgrave, founded in 1876, is a family-controlled business with 75 per cent of the shares held by the extended Musgrave family. It supplies a network of 560 independent retail franchisees in Ireland and Northern Ireland and had a turnover last year of £1.36bn.