The Irish grocery market is probably unique in the developed world, with more than 75 per cent of the market still controlled by family members - the Dunnes, the Quinns, the extended Musgrave clan and the various individuals who own the symbol groups, namely Spar, Centra and Mace.
It's difficult to see any great change in that structure over the next year, with no sign that Margaret Heffernan, Feargal Quinn or Hugh Mackeown intend any changes to the corporate structures of Dunnes Stores, Superquinn or Musgrave. But the next year may see some major moves in the UK by Musgrave, with the option for the company to increase its stake in north of England retailer Budgens coming up next September.
In August 2000, Musgrave paid €147 million (£116 million) for a 28.5 per cent equity stake in Budgens and additional loan stock, which could convert to a 44 per cent stake every September. Musgrave did not exercise to convert that loan stock on the first anniversary of taking its Budgens stake, but there will be strong speculation that it might do so when the next opportunity presents itself in September.
Budgens is currently valued at £175 million sterling (€280 million). If that price was maintained until next September, converting its loan stock and making a mandatory bid for the outstanding 56 per cent would cost Musgrave the best part of €160 million. But Budgens is trading well and it can be taken as read that the management will be driving the business to boost shareholder value ahead of any potential bid from Musgrave.
There has been lots of speculation on how a private company like Musgrave could fund such a bid, especially since - at least publicly - Hugh Mackeown has said that the group intends to continue as a private company. If a flotation is ruled out as a source of funding for a Budgens bid, it will take some pretty inventive financial engineering to raise the finance for Musgrave, a company that at the end of 2000 had a gearing of some 150 per cent.
Current Account has never been totally convinced by Hugh Mackeown's regular protestations that family-owned status is sacrosanct at Musgrave. This year could be the one when serious corporate changes are made - if the group decided to move on Budgens.
