Liverpool-based B&M European Value Retail said it is acquiring East Yorkshire-based discount convenience retailer Heron Food Group Limited for up to £152 million.
Heron operates predominantly in the North of England, has 251 stores and currently employs 3,800 people.
B&M said that for the year ended December 31, Heron delivered revenues of £274.4 million and profit before tax of £8.6 million.
The total enterprise value of the transaction is £152 million including the debt assumed of the Heron group.
An initial cash consideration of £112.1 million was paid by B&M.
Up to £12.8 million of deferred cash may become payable based on the EBITDA performance of the Heron group up to March 31, 2019.
B&M said: “The acquisition of Heron will enable B&M to develop and roll out a complementary, proven and profitable discount convenience grocery brand.
“The customer profiles of Heron and B&M are similar and both formats are expanding successfully.
“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.
“The board of B&M believes that Heron’s expertise and attractive existing store portfolio, when supported by B&M’s proven sourcing, retailing and store roll-out capabilities, can bring an attractive new customer value proposition in an expanding sector of the grocery market.”
Heron is currently managed and owned by Andrew, David and Michael Heuck.
Michael Heuck is retiring from the business as planned, whilst Andrew and David Heuck remain in their existing trading and finance roles with Heron.
B&M, alongside the existing Heron management team, will continue to expand and develop the Heron business, initially through the addition of between 10 and 20 new stores a year.
B&M expects the acquisition to immediately boost earnings.
Simon Arora, CEO of B&M, said: “B&M is already the UK’s leading general merchandise discount retailer, serving four million 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.
“I look forward to working with David and Andrew Heuck and the Heron team to drive forward our shared ambition to deliver exceptional value for money to shoppers across the UK.”
David and Andrew Heuck said: “We are delighted to be joining forces and working with B&M.
“Both companies share a vision to bring great value to customers and the combination of Heron’s skills with the expertise and resources of B&M will mean the creation of a potent new force in the structurally growing convenience sector.
“Today’s transaction secures for Heron’s loyal and hardworking workforce a perfect long term home within the B&M Group and provides an exciting platform for the roll-out of more Heron stores nationally.”