Spar South Africa announced to the Johannesburg Stock Exchange yesterday, that it has reached agreement to buy an initial 80% share of BWG Group — which operates the Spar, Mace, Eurospar and XL chains in Ireland and parts of England — for €55m.
The new owner plans to maintain all of the existing brands within the BWG portfolio and invest up to €100m in the future expansion of its wholesale and retailing operations over the coming five years.
According to one grocery industry commentator, this deal is hugely significant for the Irish market. At the time of its debt refinancing last year, BWG had borrowings of well over €200m. It is understood Spar South Africa will absorb around €100m of that debt, further easing the debt burden.
“This is a good transaction. It reduces BWG’s debt, gives it significant capital with which to expand and puts an extremely strong trade shareholder behind it. It will give BWG the same kind of firepower as a Musgrave [which owns the likes of SuperValu and Centra],” said the source.
Comments from BWG chief executive, Leo Crawford, who, along with the existing management team [John Clohisey and John O’Donnell], will remain at the helm of the business, with no change in the company’s structure planned, echoed those sentiments.
“This is a very positive and exciting development for BWG,” he said.
“In Spar South Africa, we have secured a major international retail player as a strategic partner and a long-term investor in our own business. We have known Spar South Africa for many years and they are a great fit for BWG.”
BWG’s current management team is set to keep its 20% stake in the business for a period of six to eight years, at which point, Spar South Africa will have an option to buy the rest of the group.
Graham O’Connor, group chief executive of Spar South Africa, called BWG “an excellent fit” for his company.
“Apart from the significant additional financial strength we will bring to the business, the deal will bolster BWG’s purchasing power, deepen our expertise in store formats and design, and facilitate knowledge-sharing across all aspects of the convenience food retail sector, including logistics, warehousing and distribution,” he added.
In terms of the Spar brand, alone, BWG has over 420 outlets here and an estimated 35% share of the Irish convenience store market.