B&M moves into convenience by swooping for Heron

Retailer B&M European Value has snapped up profitable fellow discounter Heron Food Group for £152m as a move into the convenience market, moving on from rumours that it was itself a takeover target for Asda.

B&M paid £112.1m in cash and assumed £27.1m of debt on Wednesday and will pay up to £12.8m in a deferred cash payment based on Heron's profit performance up to 31 March 2019.

Heron is based in the East Ridings area of Yorkshire and made £274.4m revenue and a £8.6m profit before tax from its 251 stores last year, which average 2,500 square feet in size compared to Liverpool-headquartered B&M's 19,000 sq ft.

The acquisition will enable B&M to roll out a "complementary, proven and profitable discount convenience grocery brand", the company said, with similar customer profiles of both chains.

"Convenience is one of the areas of growth in grocery retailing today, although much of this growth to date has been based on premium pricing," it added, expecting to gain further benefits from the wider group's product sourcing and store roll-out capabilities.

B&M's Arora brothers will welcome two of Heron's three Heuck brothers who inherited the business from founder father Malcolm.

Older brother Michael is retiring from the business, with Andrew and David Heuck remaining in their existing trading and finance roles with Heron as the Arora's plan to add between 10 and 20 new stores per year to the convenience chain.

B&M had 543 UK stores trading at the end of the first quarter, with 40-50 new stores planned for the UK business at its aims for 950 target, mostly during the second half, while Germany's 79 Jawoll is expected to rise to 90 by the end of next March.

CEO Simon Arora said: "B&M is already the UK's leading general merchandise discount retailer, serving 4m shoppers per week. The addition of a complementary, proven discount convenience grocery brand to our own structural growth story gives the combined business an even longer, exciting growth runway."

Last month rumours emerged that B&M was a takeover target for Asda, with parent Wal-Mart said to be exploring potential bid options, the Sunday Times reported.

Analysts mostly poured scorn on there being much logic in such a deal for Asda, but Investec said acquiring B&M could give Walmart "an interesting format with which to build a European business, having failed previously with its big box".