Supermarket chain Iceland has agreed a £373.5m takeover bid for grocery wholesaler Booker. The merged group will be 61.1% owned by Iceland and will have combined annual sales of £5.5bn ($8.1bn). The deal, which will cost £20m to implement, is expected to generate cost savings of not less than £50m in the first year. The new group will look at combining Iceland’s home shopping with Booker warehouses to take advantage of e-commerce opportunities.
Malcolm Walker, chairman and chief executive of Iceland, said: “This merger will bring together two complementary businesses. “We share a common commitment to meeting the changing needs of our customers, and in particular to playing leading roles in the development of e-commerce.”
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“Our assets and strategies are totally complementary, and this merger is a unique opportunity to deliver value both by realising substantial synergies and cost savings, and by driving top line growth.”
Booker also today released its year-end results, which showed a rise in pre-tax profit before exceptionals to £35.4m. This compares with profits of £3.6m in the previous period – which covered 15 months due to the change of the group’s year end.
Shares in Booker surged 15% on news of the deal, while Iceland shares eased 0.7%.
“Booker’s been in a mess for a while and this deal is seen as a life-saver. This means that Booker shareholders will now be Iceland shareholders instead, and that’s good news for them,” said one senior equity salesman.
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Earlier this year Iceland pulled out of talks to buy UK stores group Bhs. Shareholders warned the company against buying Bhs, Iceland group finance director Andrew Pritchard said.
“Most of our shareholders’ feelings is that textile retailing in the High Street is in terminal decline,” he said. “(They) were saying that it would take a number of years to turn around and it is high risk.”
The merged compnay will look at the e0commerce opprunities provided by Iceland’s home shopping service and Booker’s warehouse capacity.
Iceland was the first foods store to offer a national home shopping service on the internet and is currently re-naming all its outlets as Iceland.co.uk. By the end of last year, the group was delivering 2,000 online orders per week, compared with 8,000 through a telephone call centre.
