Friday 26 May 2017

Musgrave paid as much as €200m for struggling chain

Banks to get most of cash owed but workers sweat on €2.5m pay deal

John Mulligan, Aideen Sheehan, and Charlie Weston

Retail group Musgrave paid as much as €200m for the Superquinn chain, industry sources told the Irish Independent last night.

The hefty purchase price means that banks will get the majority of the money they are owed back. The syndicate of banks are owed about €275m.

Musgrave, which will now have to get competition approval for the deal, is funding the transaction through its own cash and bank loans.

A spokesman for the group said that "any figure out there is speculation".

Musgrave is expected to set up a new company for the new business it is buying. Expensive and onerous property contracts Superquinn has on some surplus sites are not expected to be bought by Musgrave. "Some liabilities will not be taken on by Musgrave,'' said one source.

Meanwhile, Superquinn's 2,800 staff are still holding out for a €1,000 payout, despite relief that the Musgrave takeover will secure their jobs.

Suppliers of the chain were last night furious about being unable to recoup outstanding payments worth millions of euro -- with further losses likely if Musgrave decides to favour its own network of suppliers over those of Superquinn.

Musgrave, which already operates the SuperValu and Centra chains, said it was committed to keeping all 24 Superquinn outlets open, and investing in underperforming stores.

But while it said it was committed to maintaining existing terms and conditions for employees, Musgrave said a €2.5m goodwill payment agreed with staff last December -- worth around €1,000 per head in the event of the chain being sold -- would be a matter for the receiver KPMG.

Mandate trade union official Gerry Light said the €2.5m payment "could not easily be set aside", as it had been in return for staff concessions such as a pension holiday aimed at securing the chain's viability.

"While we have been very reassured by initial assurances about the future for Superquinn staff, we are seeking urgent meetings with Musgrave, the receivers, the banks and Enterprise Minister Richard Bruton to nail these down," Mr Light said.

A spokesperson for the receiver KPMG said it could not comment on the €2.5m payment agreed in the past with Superquinn staff.

Consumer watchdogs warned competition could be stifled if the takeover went ahead, as the three major retail chains -- Tesco, Dunnes and Musgrave -- would then control almost 80pc of the market.

Competing

Consumers Association of Ireland chairman Michael Kilcoyne said there was already evidence retailers were pricematching each other instead of competing to drive down prices.

The Competition Authority said it would launch a review of the merger as soon as it was officially notified of it.

Musgrave said that if the purchase was approved, its share of the Dublin grocery market would be 22pc, and 28 to 29pc nationwide.

'Checkout' magazine editor John Ruddy said while it was good news Superquinn had found a buyer, many of its stores needed reinvestment, while the decision to open others, such as in Dublin's Heuston South Quarter; Portlaoise, Co Laois; and Clonmel, Co Tipperary, had been questionable.

However, Musgrave chief executive Chris Martin denied the keys for badly performing stores would be thrown away.

"Our evaluation is very much that we'll be operating 24 stores We do see a case for investment. There has been underinvestment in stores in terms of capital, but also in ensuring staff are properly supported," he said.

Mr Martin said efficiencies could be found with the right supply chain. "That's our philosophy," he said.

"There's no doubt that there's an opportunity to look at synergies in terms of transport efficiency and so on."

The Carroll Village outlet in Dundalk, Co Louth, which is owned by Superquinn but does not trade under its name, will not be included in the buyout.

Irish Independent

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