Setback to Musgrave's plans for take over of British retail chain Londis

MUSGRAVE'S plans to take over British retail chain Londis received a setback over the weekend when the owner of the Iceland food chain signalled it may be preparing a counter-bid to challenge the Cork-based group's €90 million offer.

Big Food Group (BFG) chief executive Bill Grimsey wrote to the 2,000 shopkeepers who own the British Londis chain, which has no connection with the retail chain of the same name in Ireland, challenging the auction process for the stores that was conducted by accountants KPMG. Musgrave agreed a takeover with the Londis board last week that has been recommended to the chain's shareholders.

If the deal is accepted, Londis shareholders stand to get cash windfalls of approximately €50,000. But Mr Grimsey's intervention may re-open the sales process and snatch Londis away from Musgrave for the second time. "Despite the Musgrave offer, BFG remains very interested in making an offer for your company," Mr Grimsey told Londis shareholders. He said he could not put a value on the group to make a competing offer because he did not have the detailed financial information necessary to mount a bid.

"We continue to believe that BFG as your partner can offer you far greater benefits in the long run than Musgrave," said Mr Grimsey.

Musgrave's original €60 million offer for Londis failed when details of the bid emerged that showed Londis's four directors would have shared a payout of approximately €30 million, leaving individual shareholders with a windfall of €15,000 each.

Musgrave is expected to publish a formal offer document with full details on its revised bid within the next four weeks. Musgrave managing director Seamus Scally said last week that the €90 million offer for Londis reflected a "very full" purchase price. The group beat off competition from around 20 other bidders to win the approval of the Londis board.

Musgrave shelled out €270 million in 2002 to take control of the Budgens chain of convenience stores in Britain. It recently announced plans to offload over 170 of the stores to individual retailers, to operate under franchise.