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Superquinn proves crisis in retail sector

If the Government didn't know the retail industry was struggling before this, it certainly knows it after the country's third largest supermarket group was put into receivership on Monday night. While a buyer, Musgrave, luckily came forward yesterday to buy Superquinn, there is no doubt the industry is going to see more receiverships and liquidations, as long as consumer spending remains weak and rents remain too high.

In the case of Superquinn, the problems are even deeper, with owner Select Retail Holdings taking on too much debt on property deals that became a millstone once the market started turning down in 2007. Musgrave, understandably, will try and avoid taking on some of these liabilities.

Musgrave simply wants the trading business of Superquinn which fortunately is performing reasonably well in difficult circumstances.

It is believed Superquinn has been for sale for more than two years and clearly many overseas groups didn't find the proposition attractive. However, Musgrave has deep roots in the Irish retail market and in many ways the two businesses are complimentary.

Musgrave doesn't have a full service supermarket business, relying instead mainly on its chain of convenience stores. It also lacks a deep presence in Dublin, whereas that is the strong part of Superquinn's offering.

Reports suggest Musgrave may have spent as much as between €200m and €250m on the purchase, which is a huge sum in the current climate. It will also have to put aside some capital for the stores themselves, which are in need of refurbishment.

Crucially Musgrave is giving commitments that jobs will be retained, most likely all of them. In that sense, while the deal clearly represents a wake-up call for the entire retail industry, the eventual outcome could have been a lot worse.

Irish Independent