There were deals galore in last week as B&M snapped up Heron Foods and DFS bought Sofology. We look back at some of retail’s landmark deals.
Big break
Alliance/Boots
The City was sceptical when Boots entered a £7bn merger with pan-European wholesale and retail pharmacy group Alliance UniChem in 2005 to form Alliance Boots.
The aim of the merger was to create an international pharmacy-led healthcare group and was, in part, a fight back against the supermarkets, which had at that point begun their march into toiletries and over-the-counter drugs.
It was at the time, derided by analysts who believed that the two companies would not necessarily be stronger together.
But Alliance Boots proved its doubters wrong, turning out positive results in the years following the merger before forming a truly global business by merging with Walgreens in 2015.
Walmart/Asda
Walmart, the world’s largest retailer, snapped up Asda for £6.7bn in 1999. The deal doubled the size of Walmart’s international business.
Asda may be struggling of late but the retailer has grown from 229 to more than 600 stores under Walmart’s ownership, while sales have surged from £8bn to £21bn.
Walmart’s economies of scale have helped Asda maintain its low retail prices and the UK has become one of the US retail giant’s most successful markets.
However, Asda’s performance has come under pressure in the past few years with the retailer admitting it fell “behind expectations” last year when pre-tax profits plunged 18.8%.
Tesco/One Stop
Currently convenience is one of the most attractive retail categories to be in. Tesco’s £377m acquisition of One Stop owner T&S Stores – the second-biggest c-store player at the time – brought the supermarket giant massive clout overnight, taking its market share to 5%.
Tesco converted many stores to its Express fascia, but retained the One Stop fascia to be developed as a franchise business. The deal was a big contributor to building Tesco’s power in convenience.
Kingfisher/Screwfix
Based in Somerset, Screwfix started life as Woodscrew Supply Company in 1979. It launched a mail order catalogue dedicated solely to screws in 1987.
Kingfisher snapped up the firm in 1999, five months after it launched its first website, and since then the trade specialist has become the jewel in its crown.
It now has a store footprint of more than 500 UK units, with ambitions for 200 more in the next two years. But its particular strength has been in digital innovation. Screwfix – driven by the demand from its busy trade customers – has led the way in ecommerce, apps, loyalty and fulfilment.
Amazon/Lovefilm
Who would have thought that Jeremy Clarkson would work for Amazon? The etailer snapped up a 42% stake in Lovefilm in 2008, bought the rest of the business in 2011 and has since rebranded it as Amazon Prime Video.
The streaming service is a big reason why Prime customers opt to spend £79 a year for membership. Prime is the growth engine of Amazon’s retail arm; members spend about 4.6-times more than standard Amazon shoppers, according to a Morgan Stanley survey carried out earlier this year.
Amazon has also turned broadcaster and has produced shows including the award-winning Transparent, The Man in the High Castle and The Grand Tour, starring Clarkson.
Big mistake
Asda/Gateway
In the late 1980s Asda set off on the M&A trail with ill-fated deals such as a tie-up with furniture retailer MFI – a merger in 1985 was followed by the sale of MFI two years later – that culminated in the purchase of 60 large Gateway stores.
Asda paid over the odds for the shops and, ground down by the burden of debt, teetered on the brink of collapse. Cue the arrival of Archie Norman, who went on to pull off one of the most famous retail rescues of recent decades and sold Asda to Walmart in 1999.
The Co-op/Somerfield
The Co-operative took over Somerfield in 2009 as the aftershocks of the recession ran through retail. According to the Co-op, the deal, worth £1.6bn, “propelled [it] into the premiership of food retailers”.
In contrast, Retail Week’s then editor Tim Danaher termed the takeover “the most unlikely pairing since Lib Dem politician Lembit Opik shacked up with a Cheeky Girl”.
He turned out to be right. The Co-op may have ended up with an 8% market share and £7bn in sales but just seven years after the takeover it offloaded the chain.
Picked up by The Food Retailer Group, a subsidiary of Hilco, the stores were then converted to Budgens.
Dixons/Silo
Dixons’ 1987 purchase of Silo – the third largest electricals retailer in the US, with 147 stores – kick started an unhappy chapter in its history.
While Dixons’ more recent merger with Carphone Warehouse seems to be a textbook example of how to maximise returns, its Silo undertaking has gone down in retail folklore as a lesson in how not to expand abroad.
Dixons bought Silo from owner Cyclops but struggled to adapt its European style to the US, and opted to open smaller format stores that were common in Europe rather than superstore formats being launched by US rivals.
After running up huge losses, Dixons sold Silo to Fretter Inc in 1993. The new group, in which Dixons still maintained a stake, filed for bankruptcy in 1995 and the final stores closed in 1996.
Morrisons/Kiddicare
Morrisons won a hard-fought battle to buy baby products etailer Kiddicare for £70m in 2011. Three years later it sold it on to private equity firm Endless for £2m.
Morrisons had wanted Kiddicare to help spearhead its online launch, however, it opted to tie-up with Ocado for its digital debut instead.
The grocer had acquired 10 superstores – formerly Best Buy stores – for Kiddicare, which were heavily loss-making. Morrisons took on a £163m impairment charge to cover the cost of exiting the business.
Kiddicare is now owned by Dunelm, which plans to open 50 Kiddicare shop-in-shops, Retail Week revealed last month.
Clintons/Birthdays
Clinton Cards bought Birthdays in 2004 for £46.4m and at the time said the deal “represents a significant step in [our] strategy of increasing high street presence and delivering profitable growth opportunities for shareholders”.
However, Birthdays faced tough competition from fellow value player Card Factory and did not turn a profit after it was acquired by Clintons.
In 2009, when the credit crunch hit, Clintons was forced to place Birthdays into administration and subsequently bought back 196 of its 332 stores. However, it wasn’t long before Clintons itself collapsed and was rescued by US firm American Greetings.
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