By NEIL HARTNELL
Tribune Business Editor
SUPER Value's acquisition of City Markets' four remaining New Providence locations is effectively done and only awaiting the Government's shop licence approvals to be consummated, Tribune Business was told yesterday, the former's owner saying he "couldn't risk" the stores falling into the hands of a competitor.
Rupert Roberts, Super Value's president, confirmed to this newspaper that his supermarket chain was "ready to go" when it came to taking over its former rival's outlets, with orders and staff "on hold" waiting to re-fit and re-stock the new locations.
Acknowledging that taking over the former City Markets locations would "cannibalise" sales at some of Super Value's existing 11 sites to some extent, Mr Roberts said the four new locations each needed to generate $250,0o0 in sales a month to reach profitability.
While generating a collective $1 per month in sales from the new locations would prove difficult in the short-term, given the state of the economy, Mr Roberts said Super Value was aiming to get them to a "break even" point, positioning them for the eventual economic upswing.
And, explaining how the takeover would work, Mr Roberts said Super Value was not acquiring City Markets, or its operating parent, Bahamas Supermarkets, as a company.
Instead, his company was acquiring assets in the shape of City Markets' leasehold interests in four stores, and taking over "a share of the losses" incurred by the Finlayson family-owned vehicle, Trans-Island Traders, which holds the controlling 78 per cent equity stake in Bahamas Supermarkets.
Indicating that Super Value was also paying for "goodwill" based on potential future earnings from its expanded supermarket chain, Mr Roberts was unable to offer any comfort to the Bahamian investors who held the 22 per cent minority City Markets stake, saying they had been "wiped out" under the disastrous BSL Holdings ownership that preceded Mr Finlayson.
Asked by Tribune Business how close he was to acquiring City Markets' remaining stores, Mr Roberts said: "As close as the Government's position. If the Government had given us a decision last week, we'd have been stocking groceries right now. This would have been a done deal if government had made the decision.
"We have to have licences before we can take it. Shop Licences. Once we have the Shop Licences we can get the Business Licence. They seem eager to give the Business Licence, but the Shop Licences have to be considered..... That's all we're waiting on.
"We expect this to happen very, very soon. We don't expect government to drag their feet on this. We expect government to give it their urgent attention and make a decision. I'm certainly expecting a positive decision."
"We have orders made up and are ready to place them. We have a lot of people on hold. They're asking me for the go, go, go. I'm very confident the Government will give us that. This is fun to us. This is what we call fun. We're ready to go. Just the Government giving us a go, and the fun starts."
It is highly unlikely that the Government will delay or refuse to approve the necessary Shop Licences, given that the deal's failure would see the City Markets stores almost certainly close and another 200-300 Bahamians join the already high unemployment figures.
This would not be desired, especially so close to a general election. The Finlayson family also want a quick sale, given that they are estimated to be pumping in around $500,000 of their own money per month to keep City Markets open.
Mr Roberts disclosed to Tribune Business that Super Value only wanted to take over three of City Markets' four New Providence locations. Indicating that Cable Beach and Harbour Bay were the two top sites, that leaves one of Prince Charles Drive (Seagrapes) and South Beach that are unlikely to make it into the Super Value fold.
Confirming that he was also not interested in the Eight Mile Rock location, the Super Value owner/president added of the New Providence locations: "I would like to have Mark [Finlayson] rent one to someone else. To make it work, we'll take it over, but Mark and myself are working on that."
Explaining how the deal with the Finlayson family would work, Mr Roberts said: "What we're doing is paying some of the previous owner's losses." The last management accounts for City Markets, for the year ended June 2011, showed a more than $16.5 million loss before exceptionals, but it is unclear whether all of this was incurred by the Finlaysons, or how much will be taken over by Super Value.
Still, Mr Roberts added: "There's future value there. There's goodwill there, and in the future we will make money. That's what we're paying for. We're not buying any company, we're buying assets, and there's not enough assets there. We have to call the balance goodwill."
With its existing infrastructure, such as the warehouse and administration capabilities, plus the increased buying power generated by the extra stores, Super Value is aiming to generate further economies of scale in a bid to "keep prices down and, in some cases, reduce margins".
Explaining the rationale for taking over the City Markets store sites, rather than just letting his competitor go out of business and then pick them up, Mr Roberts told Tribune Business: "We could have taken the chance and seen if the locations came to us to rent the stores.
"That would really be taking a chance. We do want Cable Beach, where you have the Baha Mar expansion. We wanted Cable Beach and Harbour Bay, and wouldn't want the risk of someone else getting them.
"We need them to take any overflow we're going to get when the economy picks up....... We don't know what we're going to pick up. But it takes $250,000 a week to make those stores profitable.
"We can't expect $1 million to spring out of the ground. Some of that is going to come from the competition, some from ourselves. But the majority of that is going to come from ourselves unless the economy picks up. We know that and are planning for that. We're looking for those stores to break even. It's an investment for the future. We're reinvesting for things to come."
Mr Roberts estimated it would take around 17 days, or some two-and-a-half weeks, to get the existing City Markets stores cleaned, refurbished, reequipped and restocked for opening.
He told Tribune Business that the Finlayson family would not remain with the business, and that City Markets' 22 per cent minority investors had already seen the value of their shareholdings "go to zero a couple of years ago".
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