Morrisons, Asda and M&S could be interested in making a takeover bid for McColl’s, despite the stock market fearing the convenience retailer is “the sector’s Miss Havisham”, according to retail analysts.
Peel Hunt analysts Jonathan Pritchard and John Stevenson said McColl’s would be of “great interest” to the supermarket giants as they “lack true convenience chains”.
The recent £3.7bn Tesco-Booker merger and Sainsbury’s potential £130m takeover of Nisa showed the “underlying value of c-stores”, which “form an increasing solution to big retailers’ online issues”, they said.
But the analysts described their confusion over McColl’s’ “cheap” share price (200p) in the wake of the deals, saying it was being overlooked and undervalued.
“Yet there is no bid premium in the share price at all: indeed, we’d say that it discounted more bad news than good news,” they said.
“We can only assume that the market thinks that forecast momentum is negative (we’d completely disagree) or that McColl’s will be the sector’s Miss Havisham.”
They added: “Do people think in a world of partnerships and mergers, McColl’s will be the only girl without a dance partner at the end of the prom?”
But Pritchard and Stevenson said McColl’s was nothing like the Charles Dickens character once jilted at the altar, calling it a “key strategic asset”.
And with McColl’s having nearly 1,000 stores supplied by Nisa, and 40% of the buying group’s sales, it will be key in discussions over a deal with Sainsbury’s.
“Nisa without McColl’s is a very different animal to Nisa with it, and the valuation of the business would clearly change materially,” they said.
“McColl’s is clearly very important in negotiations.”
Pritchard and Stevenson said the consequences of the takeover would be “mainly positive” for McColl’s, which could see a drive in footfall to stores - if Argos pick-up points were introduced at the outlets.
McColl’s bought 298 Co-op stores in December 2016 to take the number of convenience stores it owns in the UK to 1,300.
It began to integrate the Co-op stores into its network at the end of January, with all conversions set to be completed by August.
McColl’s declined to comment.
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