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February 2003

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February 2003




Exclusive interview with T & S boss after tesco deal.


Kevin Threlfall spent 30 years building up a retail empire in relative obscurity - until Tesco came along with an offer no-one could refuse. Jim Pendrill caught up with the boss of T & S

Out of sheer embarrassment I wasn't going to tell you how this working lunch began. But then I thought damn it, I spend enough time humiliating important people so all the more reason for me taking it on the chin like the rest of them.

The story begins on the morning of my appointment with Kevin Threlfall, boss of convenience store chain T&S, when, nursing a hangover from a rather big bash the night before, I ring the pub in Albrighton where I am due to meet him to check on directions.

A cursory glance at a mapping website the evening before had confirmed my original hunch that the village was to be found outside Shrewsbury near some friends of mine, although I must say the name of the pub itself did throw me a little. I should have seen the warning signs.

But no need to fear. On calling the establishment, the delightfully named Horns of Boningale, the person at the other end confirms (or at least I think they do) that they are indeed just outside Shrewsbury on the main road in the village, although (ominously) I fail to take heed of the road number.

For anyone who knows their Shropshire geography (and I clearly don't) you can see what is coming. Like one of those bad dreams where you never quite reach the place you're meant to be getting to, I would proceed to spend the next half an hour on the A5 heading back in the direction I had just come from to reach that other Albrighton outside Wolverhampton.

I am of course flustered, unprepared and feeling frankly a bit of a fool when I walk into the Horns half an hour late. But I needn't have worried. For there sat on a bar stool with pint in hand and looking like he owns the place (in fact he used to) sits my interviewee looking perfectly at home in the surroundings.

My photographer who had foolishly followed me to Shrewsbury has already told him the story and he greets me by chuckling to himself with his distinctive smoker's laugh. The joke will run all afternoon, but it breaks the ice between us in less than a minute.

Before our meeting I had read much about how, for the boss of such a big company, father-of-two Threlfall was such an extraordinarily down-to-earth guy. His beloved Wolves, having a pint and a curry, and taking the family on holiday were cornerstones of his life.

Here I witnessed that character within seconds. After the start we had had, some businessmen would have either refused to do the interview or at best grabbed a sandwich and made their apologies within half an hour.

But not Threlfall. Within five minutes we are already deep in discussion about the Tesco deal and the state of British retailing. It was a fascinating discussion we would continue for the next two hours.

In fact hangovers and misdirections aside (I join Threlfall in clutching a pint of Coca-Cola as he himself admits to feeling a little weary from the night before) this isn't really even the best time to be interviewing him.

For the day we meet his life is somewhat on hold as he waits to hear whether the Office of Fair Trading will refer Tesco's all shares bid for T&S to the Competition Commission.

A decision is expected in a couple of weeks and so, by the time you read this, Threlfall will either have just enjoyed his best Christmas ever, or be crying in his soup if the bid is referred and the offer lapses.

The deal of course will make Threlfall an even wealthier man. Tesco's £3519m bid for the convenience store group means his remaining shareholding in T&S is now worth a cool £316m in Tesco shares.

Indeed, I'll stick my neck out and suggest Threlfall did have a rather good Christmas after all. As he argues: "It would be extremely unusual if Tesco had not got guidance from the relevant authorities that they were likely to get the bid through. I doubt whether they would risk their reputation on a referral."

Threlfall says the deal still only gives Tesco less than 5 per cent of the convenience market, and the only possible issue is with suppliers who use both T&S and Tesco.

However, opponents of the deal fear that it will unfairly hit corner shop owners by giving Tesco a stronger buying power over manufacturers. The Institute of Asian Businesses for one has warned that thousands of Asian shop owners could be badly hit.

But Threlfall dismisses opposition to the deal, saying that the Tesco bid has "sent a shiver" through the whole convenience store sector which will lead to it significantly raising its game.

He insists that there will still be room for independents to survive although he does accepts that about 5 per cent of the 55,000 convenience stores in Britain will disappear over the next five years as standards rise.

"It is important that Tesco come into this market. It is an industry that is so fragmented that the range of standards go from the sublime to the ridiculous. That old clichx8e of shops selling outdated stock while the cat sleeps on the counter can still be found today although you certainly won't find it in any of my shops. Tesco will bring professionalism to the whole sector."

And lower prices too, Threlfall believes. "Convenience store prices have held up precisely because they are local and that is their USP. However, if Tesco buy cheap then they will sell cheap and customers will get a better deal. If customers are getting a better deal you cannot cry foul.

"In fact by professionalising the convenience sector Tesco will take trade away from the supermarkets. If you can buy quality products at a reasonable price there is no reason why you don't start doing your shopping on more of a daily basis. If you can buy quality food at the right price the convenience market will increase its market share."

Crucially in this context Tesco will bring improved delivery of fresh groceries and chilled foods to the sector, the precise reason why Threlfall was keen to work with Tesco in the first place.

As he tucks into a mighty fine slice of Shropshire ham, he freely admits that it was he who first approached Tesco chief executive Sir Terry Leahy back in March last year about developing a chilled range for T&S's 850-plus portfolio of One Stop stores and 90 Day & Nite stores.

At that stage a takeover was not on the radar, although Threlfall admits that he was keen to hear more about Tesco and particularly Leahy's own plans for the convenience sector.

"They had about 100 Express shops each of which was turning over three times as much as one of ours so you could see my interest. To be frank they had been messing around with the Express format for a while. They wanted critical mass."

No surprise then that the two sides began talking more than just about frozen prawns. "Our background was in confectionary, tobacco and news. Theirs was in grocery. We realised we could each learn things from each other but a joint venture didn't work and we realised a buyout could be possible."

Tesco spent the summer investigating whether they would get the deal past the OFT while Threlfall went through hell trying to keep the lid on the talks.
"It was a nightmare, I couldn't even tell my friends. If it had leaked out the share price would have rocketed and Tesco would have walked away from the deal. It was like living on a knife-edge."

By the autumn serious discussions had resumed and the resulting deal with Tesco offering 455p a share Threlfall describes as "a very fair and reasonable price".

"Our share price has been averaging 330p over the last three years and if you look historically bidders tend to pay a 30-40 per cent premium. Very few people say Tesco has underpaid."

Threlfall admits that initially he felt a pang of guilt for his staff that he was selling the company on, but he soon changed his view.

"I realised I had actually given them the opportunity to work for the best retailer in Britain. I said to them that if they were up for it and good enough their future would be secure. Tesco will invest in our stores."

In the days after the deal Tesco was quick to announce that it would also be keeping T&S's customer and distribution centre in Brownhills which has 1,000 staff.

However Threlfall also admits that the stock market isn't patient and there would have come a time very soon when T&S had to look at its long term options.

"You have to keep growing and we would have kept growing but not at the pace I would have liked. If this deal falls through we will continue to plough our own furrow and we will get there, except that it will take a couple of years to reach 455p."

If the deal does goes through Tesco plans to convert around 450 of the best T&S stores into Express formats. Threlfall himself thinks they may then convert the remainder of the convenience stores into possibly a "village" version of the Express. T&S's other divisions, Supercigs and Dillons, would be sold on, in line with T&S's own drift away from its less profitable newsagents and high street discount stores business.

For Threlfall the deal is part of a continually evolving retail scene which he has masterfully read for the last 30 years since setting up his first business, Lo-Cost Discount Stores, out of a Wolverhampton factory.

Like all serial retailers he has mastered it by continually watching both consumer trends and the opposition, whether it be constantly visiting his own stores or others across the country.

"You have to be almost paranoid that someone is trying to steal the clothes off your back. If you do not, you become complacent and lose your leading edge. Tesco have a paranoia about people stealing market share."

Of course he hasn't always got his own way. Threlfall freely admits that back in the 1970s he was eventually forced to sell his Lo-Cost business to Oriel Foods because he didn't have a hope of competing with Kwik Save, a company that he refers to as something akin to a retail god at the time.

"Kwik Save was way ahead of its time in the 70s with its whole culture based on minimalism. They never had a rights issue and were never geared. We could not match them. It's a business I would have loved to have built up myself."

But the fortunes since then of Kwik Save simply ram home Threlfall's point about ever changing retail habits. "They tried to become a mid-range grocer and things began going wrong from there. T&S is now worth more than they are. That is what can happen in 20 years."
And as Kwik Save went in one direction Threlfall went in another. Following the sale of Lo-Cost he was able to devote all his energies into building up T&S which he had earlier founded with his old (and still present) chum David Lockett-Smith. In 1984 the company was listed and the big breakthrough came five years later when it audaciously acquired Dillons and Preedy's from Next.

After the deal T&S restructured away from newsagents towards a convenience business as it cleverly realised that not everyone had a car and not everyone would now shop at out-of-town supermarkets. A series of acquisitions followed and the group - despite its extraordinarily low profile in the City - inevitably became a tasty proposition for the larger retail giants.

And so, providing the competition authorities make Threlfall's Christmas, what next?

If the deal goes through he will be kept on as a £3225,000 a year consultant by Tesco but it is clear that he is ready to all but hang up his serious business boots.

"This is definitely the last chapter and is I hope a happy ending for me. Every happy story has to have a happy ending."

Threlfall also once said that when he began in business there was an element of wanting to finish something that his Dad, originally a travelling salesman, had started and I sense that that mission has now also been accomplished. "I suppose you are probably right. I have more than achieved all I wanted to achieve."

Besides, Threlfall has plenty to keep him busy out of the office. He still co-owns a Birmingham canal boats business, is a governor at his own original primary school in Albrighton, is a non-executive director of the Staffordshire Building Society, is president of Fordhouses Cricket Club (where his father was once a captain), flies a plane from Halfpenny airport, goes off a handicap of 11 at the golf course, and never misses a Wolves game. Threlfall has great delight in later showing me a framed copy of the front page of the Sporting Star the day after Wolves' 1949 FA Cup triumph over Leicester City which hangs in the pub's Gents. Threlfall had the picture put up when he co-owned the pub in the 1990s. The headline reads "It's here" although the I of It's is omitted. T and S - geddit?

Back in the lounge as the coffee is poured I ask what reaction he has received from friends following the deal. "Oh, about half have congratulated me and half haven't even mentioned it. I think the latter just see it as another deal. One of the funniest things that happened was that I received a letter from my old school Denstone College within three days of the deal asking whether I would like to have a Threlfall theatre or something, at a price of course. I couldn't believe it."

Talking of Denstone reminds Threlfall of one of the most defining moments in shaping his business brain. I'm tempted to joke that it was Christmas 1962 when he and some college friends stole a specially imported Swedish Christmas tree from JCB founder Joe Bamford's back garden.
Actually the story relates to JCB itself. "I always remember looking down the hillside from Denstone and seeing the original sheds in which JCB began.
"Even in the short time I was at the college I would see that business grow incredibly.

It was an inspiration to any aspiring entrepreneur."

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