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Co-op has agreed the sale of 298 of its smaller food stores to McColl’s Retail Group for £117m.

The deal is now subject to approval from the CMA and McColl’s shareholders.

The sale of the stores, which average 1,700 sq ft, was part of its growth strategy focussing on convenience and own-brand, the Co-op said. Proceeds from the would be re-invested to further deliver this strategy, which had already made it the most frequently visited food retailer in the UK, the Co-op 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,” said Co-op Food CEO Steve Murrells.

“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 sale will leave the Co-op with a net store estate of about 2,600 at the end of the year, while boosting McColl’s estate from its current 933 to 1,231 stores.

McColl’s chief executive Jonathan Miller said the acquisition of the 298 stores was a transformational deal for McColl’s. “This opportunity substantially accelerates our growth strategy and expands our neighbourhood presence for the benefit of our customers,” 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. I look forward to welcoming all of our new colleagues to the business.”

McColl’s will carry out the acquisition through Martin McColl Limited, a wholly owned subsidiary of the company. It also announced the placing of 10,460,732 shares to new and existing investors, to raise approximately £13.1m (before expenses), the net proceeds of which will be used to help fund the acquisition.