Monday, September 7, 1998 Published at 14:46 GMT 15:46 UK
Business: The Company File
Booker courts Budgens in food merger
Booker has its eyes on supermarket chain Budgens
UK food distributor Booker and supermarket chain Budgens have announced merger talks are underway.
The move comes a month after Booker was courted by supermarket group Somerfield in a merger deal that Somerfield ultimately abandoned.
The company said a merger with Budgens would create a combined sales in food distribution of more than £5bn ($8bn).
The share price in both companies fell on the news. Budgens shareholders doubted the value in buying into a troubled company while Booker shareholders worried about a conflict of interest. Booker is already a supplier to smaller corner shops which are rivals to the Budgens supermarket chain.
Analysts agreed such a relationship would not sit well, but said that some sort of merger could be Booker's only way out of problems.
Doubts over the financial health of Booker have been raised by food sector analysts who forecast the company will announce a slide in half-year profits and dividend later this week.
Its last full-year result showed only a £22m profit on sales of £5.2bn. However the company is also saddled with £322m in net debts.
At 1500 local time (1400GMT), shares in Booker were down 14p at 174p while Budgens' shares were a penny weaker at 75p.
Looking for rescue
Booker has been seeking a food industry partner after both its domestic and export businesses have suffered from high sterling and stiff local competition.
A restructuring early in the year saw Booker sell off its non-core businesses, including author Agatha Christie's copyrights, to concentrate on food distribution.
Booker owns 171 wholesale 'cash and carry' outlets across the UK as well as salmon and chicken farming divisions. Budgens operates 180 stores in the London area.
Booker formerly owned Budgens until the 1980s.
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