Thumbs up for Booker’s Makro takeover

The industry and City appear unanimous in their congratulation of Booker’s CEO Charles Wilson for what some are calling a “masterstroke” in his takeover of Makro.

The cleverness of the £140m deal is in the fact that Booker handed over just £15.8m in cash for Makro’s 30 depots. The rest of the money goes to Makro’s former parent company Metro in the form of Booker shares worth £124m.

As one industry insider put it: “For very little outlay, Booker has now got 30 big depots, all in good locations, all that stock and goodwill and most of Makro’s supply chain will fit straight into Booker’s network.”

The question now on everyone’s lips is, what does Wilson intends to do with all that extra space? Makro’s depots are around three times bigger than the average Booker outlet, currently with a much larger range of non-food.

Booker has the choice of continuing Makro’s expertise in non-food and investing much more heavily in online trading, or vastly expanding its fmcg offer.

Philip Dorgan, analyst at City firm Panmure Gordon, told Wholesale News that whatever Booker decided to do, he wasn’t expecting any major announcements until interim results in six month’s time, adding that Wilson wasn’t likely to jump in with both feet, but instead taking stock of the business.

Whatever Wilson decides to do his task will be one of turning Makro’s negative operating margins around to at least match those of Booker at 2.3%. “Makro shouldn’t be running on negative margins,” said Dorgan. “It’s got a freehold property estate, tobacco only makes up 14% of sales (unlike Booker’s 30%) and it has more non-food. Booker’s job will be to use that potential for cross-fertilisation of the two businesses to make cost savings and create revenue growth.

However, the head of another major wholesale group disagreed that Wilson would bide his time. “Booker is operating at a profit and if Wilson doesn’t act swiftly Makro’s poor trading will eat into that. He can’t afford to wait. ‘‘Through some simple strategies he managed to turn Booker around. Makro has been in a mess for a few years and I think Wilson will have a masterplan that move a bit quicker than that.”

Just the week before Booker had boasted improved customer satisfaction and a 22,000 rise in customer numbers as it posted end-of-year results showing a 27% rise in pre-tax profit to £90.8m for the 53 weeks ending March 30, 2012.

The group posted total sales for the period of £3.9bn – an increase of 9.4%, breaking down the rises to: non tobacco 5.1%; tobacco 7.8%; foodservice 6.1% and retail 6.1%. Overall like-for-like sales for the comparable 52 weeks grew by 6.1%.

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