The three most senior executives in BWG Foods, owner of the Spar franchise in Ireland, will share a cash payout of about €41.5 million in coming weeks, valuing the group’s total equity at about €415 million.
Chief executive Leo Crawford, finance director John O'Donnell and property director John Clohisey are due to receive the payment in December or January, as part of an estimated €81 million deal to sell down their 20 per cent remaining stake in the group to BWG's majority shareholder from South Africa.
Details of the payments are contained in the stock market results yesterday of Johannesburg-listed The Spar Group (TSG), which in 2014 bought 80 per cent of BWG. At that time, it also agreed a profits-based formula with the three men to purchase their remaining 20 per cent, beginning in December 2019.
TSG’s results show that under current profit projections, it values the executives’ shares at 1.326 billion rand (€80.8 million). It said the first chunk of the payment, about 683.3 million rand (€41.5 million), falls due next month, although it is thought likely to be after Christmas before the cash is actually transferred. Further tranches of the earn-out will be paid in 2020 and 2022.
Remarkable turnaround
The payments represent a remarkable turnaround for Mr Crawford's management team, who turned to TSG for investment in the teeth of the Irish downturn after the executives had originally bought the business from Electra Partners for €390 million in a highly-leveraged deal in 2006.
Most of their equity was wiped out in that 2014 deal, leaving them with just one fifth of BWG, which also owns Mace, Londis and XL brands. Next month's payout is their first opportunity to take cash off the table since they first invested, after turning BWG around following the crash and boosting its sales and profits.
In effect, the executives are due to sell 10 per cent of BWG to TSG next month at the set valuation. This means that the €390 million Celtic Tiger valuation of BWG has been restored and, it now appears, exceeded.
TSG’s results on Wednesday for the year to the end of September show that BWG’s annual sales rose by 6.2 per cent to breach the €1.5 billion barrier, which is about €300 million ahead of where they were when TSG first invested. Stripping out acquisitions, like-for-like sales were up 2.2 per cent.
Sales at Spar rose 4 per cent, while Mace was up 5.1 per cent. BWG’s network comprised a total of 1,360 stores at the end of September – some of which it operates, some operated independently, and all supplied by BWG as wholesaler.
Pretax profits rose by 22 per cent to about €40 million. TSG described it as a “strong financial performance” given the challenges of Brexit and the deflation that is rampant in the Irish grocery sector.
