Co-operative group plans sale of 298 stores to McColl's
The Co-operative group plans to sell off nearly 300 stores to a rival firm as it looks to overhaul its retail footprint across the UK.
The mutual said the £117 million deal will see 298 smaller food stores snapped up by McColl's Retail Group, with money from the sale used to buy 100 new stores this year and 100 more stores in 2017.
The move, which is subject to approval from regulators and McColl's shareholders, will also see 3,808 Co-op staff transferred to McColl's as part of a TUPE agreement.
Steve Murrells, chief executive of Co-op Food, said: "Today's announcement is completely in line with our strategy, as these stores did not allow us to provide a sufficiently compelling own-brand offer for our members going forwards.
"The proceeds will be re-invested to drive sustainable growth for our members and I'm delighted that all 3,808 colleagues will transfer to McColl's on the same terms and conditions."
The Co-op said it was selling the stores, which are 1,700 sq ft on average, because they are too small to stock all of its own-brand products which have been key to driving up sales.
It said the move tied in with plans to grow the total number of Co-op members to a million by 2018, while pushing up the total sales from members to 50%.
The mutual said like-for-like sales growth in its convenience estate hit 4% in the year to April, while like-for-sales across its food stores in the 52 weeks to January 2 rose by 1.6%.
McColl's said the cash deal for the stores would be part funded by raising around £13.1 million from placing 10.5 million shares to new and existing investors.
Jonathan Miller, chief executive of McColl's, said the acquisition of the new stores would "substantially" accelerate its growth strategy.
He added: "These stores are profitable, well invested, and the perfect size for our operating model. We expect the transaction to be significantly earnings enhancing for our shareholders."
McColl's, which owns 933 convenience stores across the UK and 433 Martin's newsagents, said the move would bolster sales and allow it to take advantage of growth in fresh and chilled food products.
According to its latest results, the retailer saw net sales hit £354.1 million for the year ending December 2015, up from £340.5 million in 2014.
The Co-op announced in April that underlying profits in the food business rose 3.3% to £250 million in the 52 weeks to January 2, as strong sales and moves to cut costs helped performance.
It also revealed that it had invested £320 million into opening 97 food stores and refitting 264 shops in 2015, while 91 food stores, which no longer fitted its "focus on convenience shopping" , were sold off, raising £175 million.
The Co-op, which has 3,750 outlets and 70,000 staff, has opened around 200 stores in the past two years.