B&M has bought up Heron Foods, a store chain in northern England, in a bid to move into the convenience market.
The budget retailer acquired the business, which has 251 stores, for £152m. It has paid £112m today, and a further £12.8m sum has been deferred for two years, until B&M has made a further assessment of Heron's financial performance.
B&M said it believed the convenience market was a key area of growth in the retail industry, but that consumers did not have enough access to discount convenience stores. The acquisition of Heron will allow B&M to take advantage of this gap in the market, the retailer said today.
The business also said it was buying Heron because the chain's customers had a similar profile to B&M shoppers.
Adam Cochrane, retail analyst at UBS, said:
B&M sees Heron as sitting between the convenience and discount sub-sectors, currently the fastest growing parts of the food retail market. As a regional player with a disruptive business model, there is also scope for significant expansion of the store estate.
The new group plans to open between 10 and 20 new outlets a year.
Simon Arora, chief executive of B&M, said: "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."
For the year ended 31 December 2016, Heron's revenues were £274.4m, and the company achieved like-for-like sales growth of three per cent. The firm employs around 3,800 people.
The buyout comes after B&M itself was rumoured to be the target of a merger. The Sunday Times reported that Asda was scoping out B&M for a takeover in a bid to revive its flagging sales.
Behind the deal - Roger Hart - Addleshaw Goddard