Spar-owner BWG Group has cleared its debts after realising €93 million from the sale of its Cheshire-based off-licence chain, Bargain Booze, to British private equity firm ECI Partners.
The £63.5 million sterling price was well below the £70-£80 million range mooted last June when BWG circulated an information memorandum, although its chief executive Leo Crawford declared himself "extremely pleased" with the transaction.
The deal brings BWG further down the path to a likely sale next year by its 65 per cent owner, Electra Partners, which bought into the group in 2002 and which has a five-year timeframe on its investment.
Mr Crawford said he did not accept that the price was lower than expected and said Bargain Booze had an "implied value" of £30 million when it was brought into the BWG group from Pernod Ricard three years ago. "We've more than doubled our money," he said.
Bargain Booze is the second-largest off-licence chain in Britain, with 300 stores in 2002 and 565 in advance of its acquisition from BWG last Friday.
The chain had wholesale sales of £329 million in 2004 and profits of some £8 million. Wholesale sales rose last year to £344 million. "We're pleased with the sale. It strengthens our balance and leaves us effectively debt-free," said Mr Crawford.
He added the clearance of BWG's €90 million in debt on the balance sheet is exclusive of the impact on its books of the debts of its 20 per cent owner Newhill Ltd, controlled by businessman John Clohisey.
A management team led by Mr Crawford owns 15 per cent, with the remainder in the hands of Electra, which funded the buyout in 2002. With BWG free to concentrate on the development of its Irish retail business, the sale clears the way for a smooth transfer of ownership next year.
While that sale process has not yet begun, Electra is known to have set a five-year limit on its investment. BWG signalled last March that Bargain Booze was not core to its strategy and that it wanted to concentrate on its food distribution and retail business.
In addition to Spar, the company owns the Eurospar, Spar Express and Mace brands. The convenience store business has grown rapidly in recent years, although the sector is facing new challenges after the Government decision to abolish the Groceries Order, which bans the below-cost selling of packaged goods.
ECI, whose interest in Bargain Booze was reported as long ago as last August, has a capital base of more than £500 million. "We believe that the use of the franchised model gives Bargain Booze a sustainable advantage over its specialist competitors and it is a compelling proposition to prospective franchisees," said ECI managing director Tim Raffle.
The Bargain Booze managing directors Tim Stanley and Matthew Hughes, along with finance director Peter Hodgson, will remain with the business after the sale.
