Londis is buying beans from Tesco

SHOPKEEPERS in beleaguered store chain Londis find it cheaper to stock up with baked beans from Tesco than buy from the group's suppliers.

The astonishing admission came from chief executive Graham White in an exclusive interview with Financial Mail. He insists this is one of the major reasons why Londis no longer has a future as an independent company.

Its 2,000 outlets run by shopkeeper shareholders lack the buying clout to compete with supermarket giants.

White wants to sell Londis after controversially recommending a £40m bid from Irish retailer Musgrave that would potentially net him and three other directors £20m.

Accountancy group KPMG, which has been hired to review the board's contracts and option packages, will start talking to potential bidders this week. There are thought to be about ten interested parties, including Big Food Group - owner of Iceland and Booker cash-andcarry - Somerfield and the Co-op.

White said: 'We have far less purchasing power than a giant like Tesco, which can buy groceries at wholesale 12 or 13% cheaper and so easily sell them at less than our wholesale price.

'It's certainly not unheard of for our members to buy goods like baked beans in Tesco to sell in their stores because they are just cheaper than we can supply. We just don't have the scale to remain as we are.'

At a stormy annual meeting, angry shareholders last week condemned the deal that gives Londis executives 51% of the group's value if it is sold.

Under the recommended Musgrave bid, the 1,933 Londis shopkeeper shareholders would receive only £10,000 each.

Londis chairman Peter Williams has already promised to review the multimillion pound executive option scheme while he and White will resign if they fail to agree a deal with shareholders to sell the chain.

In a further concession, it has emerged that Londis is close to announcing the appointment of two non-executive directors from among Londis's co-operative owners, one of whom is likely to be from the ranks of the rebel shareholders.

But the move is unlikely to appease the rebels, who insist that all the nonexecutives should resign.

The dissidents have abandoned a plan to call another meeting this week to oust the non-executives. Instead, Adrian Costain, deputy chairman of the Shareholder Action Group, will write to Williams demanding the removal of the non-execs and a complete rethink on the brief given to KPMG.

'Selling the group is not the only option,' Costain said. 'There are a number of others we should consider, from co-operatives to joint ventures.'

As the jockeying for position continues, Londis shareholders will this week receive a further letter from Big Food Group chief executive Bill Grimsey.

BFG, which stepped in with an offer for Londis following the announcement of the Musgrave bid, has pledged a deal that gives shareholders £20,000 each.

In the letter setting out BFG's campaign to win-over Londis shareholders, Grimsey claims to be the 'champion of the independent retailer'.

He pledges to run Londis as a separate business unit, but to use its muscle to get better deals from suppliers.