Booker boss Charles Wilson may find his phone ringing more regularly than usual on Thursday morning when he unveils its fourth-quarter results.
Britain’s biggest wholesaler has been thrust firmly into the spotlight after Britain’s biggest grocer Tesco revealed it had agreed terms on a mega £3.7bn takeover.
With that deal in mind, Booker’s estimable chief executive is sure to be in high demand among City analysts and journalists alike this week – and he will need to make the most of his moment on centre stage.
Wilson has already kick-started a UK tour in a bid to convince the hundreds of independent retailers operating under Booker’s Budgens, Londis and Premier fascias of the benefits of a merger with the proverbial “enemy”.
For many indies, the prospect of working alongside one of the multiples could drive them into the arms of symbol group rivals Spar, Nisa or Costcutter.
Wilson may have his work cut out there, but he has an equally tough job in winning over analysts and the media when it comes to persuading them of the merits of the deal.
Pros and cons
The rationale from a Tesco standpoint seems solid enough.
The acquisition, should it be given the green light from the relevant authorities, would give the grocer a far bigger chunk of the rapidly growing convenience and food service markets, inheriting some 5,000 convenience stores and an impressive list of restaurant clients that includes the likes of Byron, Carluccio’s, Prezzo and Wagamamas.
But the upside for Booker is much less obvious.
The company’s share price surged from 183.1p to 212.7p – higher than Tesco’s – on the day the deal was announced back in January, although it has now found a more consistent home at around the 200p-mark.
“Those numbers serve to highlight the turnaround effort Wilson has spearheaded since taking the helm in 2005 – but the Tesco deal has the potential to throw all of his good work into jeopardy”
That, for Booker shareholders, may be as good as it gets.
As Shore Capital’s Clive Black pointed out two months ago: “The initial gut reaction, which is usually the best one, is that it may be sound for Tesco, but far from compelling for Booker shareholders.”
The wholesaler has enjoyed nine consecutive years of EBIT growth and only a catastrophic fourth quarter would see it fail to extend that run.
And it looks set to further build on its last set of full-year results, covering the year to March 25, 2016, when operating profit surged 11% and total sales climbed 5%.
Those numbers serve to highlight the turnaround effort Wilson has spearheaded since taking the helm in 2005 – but the Tesco deal has the potential to throw all of his good work into jeopardy.
First there is the looming prospect of a protracted and messy investigation by the Competition and Markets Authority, which can distract even the most focused of executive minds.
And even if Tesco and Booker leapfrog that hurdle, the process of merging the two businesses could be equally drawn out, given the work the grocery giant is still undergoing to get its core supermarket division firing on all cylinders again.
The added layer of complexity will be a worry for the City, not just from a Tesco perspective, but a Booker one, too.
The focused, cash-positive and high-cash-converting business under Wilson will suddenly have new hands to hold as it continues the journey along its growth path.
No matter how impressive Booker’s fourth-quarter performance is, Wilson will need to be on top form to convince the City that Tesco and Booker can navigate that path successfully together.