Londis, like Musgrave, does not own any of its own stores, but provides purchasing and other functions to a network of independently owned outlets. But the Musgrave bid would have seen £21 million of the £40 million price tag going to just four Londis directors - none of whom own shares in the company - leaving the 2,000 or so store owners to share the remaining £19 million.
The waters were muddied further by the emergence of a rival bid for Londis from the Big Food Group, owner of the Iceland and Booker businesses, which offered to pay the same price for the group but with just £0.6 million going to the four Londis directors and £39.7 million to store owners.
Londis management refused to co-operate with BFG, which made its offer by writing directly to all Londis store owners, but was nonetheless obliged to withdraw its support for the Musgrave bid amid intense pressure from increasingly irate shareholders.
Musgrave said it was disappointed with the decision not to recommend its offer, which has now been withdrawn, but said that it had been prevented from negotiating a better deal with Londis store owners by the terms of a confidentiality agreement with the company's management.
It also stressed that it had been approached by Londis and not the other way round, and that it had no power to change the legal statutes of the UK group which guaranteed the four executive directors the lion's share of the proceeds should the company be sold.
But despite the withdrawal of the initial offer, Musgrave has not given up on Londis. In a letter to Londis shareholders, Eoin McGettigan, executive chairman of Musgrave, said that company was "ready and very willing to enter into discussions to explore a reformulated offer which will be acceptable to all parties" and that it "remained convinced of the compelling commercial logic of partnering with Londis".
No new bids have as yet been made for Londis, but BFG and Musgrave are expected to face competition from at least seven other interested parties, according to press reports, including Nisa Today's, another buying group which supplies the Costcutter chain.
But no matter who buys the group, the problem still remains of the clause which allows the executive directors to walk away with more than half the value of the company. Negotiations over changes to this share option scheme are likely to be far harder than those over the sale of the company as a whole, and with shareholders also calling for the resignation of the non-executive directors who agreed to the scheme, the possibility of an EGM to resolve the issue cannot be ruled out.
However, the indications are that the directors are prepared to negotiate an agreement which is more acceptable to the company's shareholders, paving the way for the drawing up of a shortlist of potential bidders sometime next month.