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McColl's gets final clearance for 'transformational' Co-op store deal

Convenience store chain McColl's has won clearance from the competition watchdog for a "transformational" deal to snap up nearly 300 outlets from the Co-operative Group.

The final clearance from the Competition and Markets Authority (CMA) comes after the acquisition was first announced in July and will see McColl's add another 298 shops to its 1,000-strong convenience store estate.

It will also allow the Co-op to focus on its larger stores.

The CMA said in October it was investigating the deal to examine whether it would result in "a substantial lessening of competition within any market or markets in the United Kingdom for goods or services".

Jonathan Miller, chief executive of McColl's, said: " This is a transformational deal, which substantially accelerates our growth strategy and expands our neighbourhood presence for the benefit of our customers.

"We have a long history and proven track record of successfully integrating convenience stores into our estate, and we expect these newly acquired stores to make a significant contribution to our future strategic plans."

The group will start integrating the new stores into its estate in January and expects the shops to be converted to its branding by the end of next August.

McColl's recently unveiled its sixth year in a row of rising sales, posting growth of 1.9% over the year to November 27 thanks to expansion efforts.

But with the boost from new stores stripped out, like-for-like sales remained under pressure, falling by 1.7% in the fourth quarter and 1.9% over the full year.

This marked a slight improvement on a 1.8% drop in the previous three months.

Same-store sales in its newsagents and standard convenience stores fell 3.3% over the full-year, but McColl's said the performance was better in recently acquired and converted stores, where like-for-like sales lifted 0.8%.

Retail experts at Liberum said the stores purchase would see a "step-change" in McColl's results.

They said the deal would drive a 22.6% surge in underlying earnings in the 2017 financial year, while they believe annual profits per store could rise by 24% to around £33,100 by 2019.

Adam Tomlinson, at Liberum, said: "McColl's is consolidating the fragmented UK convenience sector and benefiting from a structural switch as shoppers make more frequent, top-up purchases."

McColl's already has 1,001 convenience stores and 374 newsagents across the UK.

The acquisition of the Co-op stores will boost its estate to more than 1,670.

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