Co Op Nisa Merger

The latest move from the Co-op was confirmed by Nisa chairman Peter Hartley

The Co-op has entered into exclusive talks to buy Nisa, after Sainsbury’s cooled its interest in the buying group.

The Grocer first revealed earlier this month that Sainsbury’s, which had originally been in a period of exclusivity with Nisa, was not going to make a formal offer until at least the end of October while the Co-op had come back to the negotiating table.

The latest move from the Co-op was confirmed by Nisa chairman Peter Hartley in a note to members yesterday.

“The board of Nisa has held a number of positive discussions with the Co-op in recent weeks, following its reaffirmation of interest in making an offer for your company,” he said.

“During these discussions the Co-op has confirmed, subject to further due diligence, its intention to progress matters as quickly as possible, in the hope that a transaction can be finalised. The Co-op is willing to incur costs on its own account to do this.”

The Grocer understands the Co-op’s original offer for Nisa was subject to the buying group retaining its contract to supply McColl’s Retail Group. However, at the beginning of this month McColl’s agreed an exclusive supply deal with Morrisons beginning in January. It had been suggested by some industry experts that the loss of the McColl’s business would result in a reduced offer price from the Co-op. However, it appears the original price of £140m still stands, while its material adverse change stipulation has been dropped.

The Co-op bid is higher than the £130m offer from Sainsbury’s, which was favoured by the Nisa board and led to the multiple grocer getting the first opportunity to complete due diligence ahead of potentially submitting a formal offer. Sainsbury’s approach was deemed preferable as it appeared to provide more options for Nisa members regarding the future of their business, including an outright sale, a franchise model or an option to remain independent while retaining the Sainsbury’s-owned Nisa as their primary wholesaler.

It is not known if the Co-op has now provided any further details on this issue.

In his note, Hartley added: “Key elements of the discussion remain ongoing and while these are not yet resolved the conversations with the Co-op to date have been pragmatic and constructive.Your board continues to focus on resolving them in a manner which is satisfactory to members.

“As a result, and in line with the board of Nisa’s duty to act in the best interest of all Nisa members, your board has granted the Co-op a period of exclusive due diligence from today. Thereafter, and subject to the results of the due diligence, it is anticipated that the Co-op could be in a position to make a final offer to the members for your consideration. Should an offer of merit emerge from this process, it will be for you, the members, to decide on whether to accept it. However, it is important to stress that there is no guarantee that an offer will be forthcoming.”

Hartley added this further caveat: “As you are all aware our business and the convenience sector continue to evolve at pace and the board of Nisa will continue to review serious queries and offers which emerge (within the constraints of any agreed exclusivity period) and which it believes are in the best long-term interest of the members.”

A spokesman for the Co-op added: “We can confirm that we’ve entered into a period of exclusivity with Nisa, which will provide the opportunity for us to carry out more detailed due diligence in the coming weeks. Following this period and subject to approval from our board, we hope to be in position where we can put forward an offer to Nisa members.”

Sainsbury’s is thought to have been concerned by the uncertainty in the wholesale and convenience sector as highlighted in the CMA’s findings on the Tesco-Booker deal, which it published last month after confirming it was launching a phase two investigation into the deal.

Hence it took the decision not to progress to a formal offer until after the CMA released its phase two finding towards the end of October.

Cash & carry operator Bestway is another business thought to be interested in Nisa, while it could also look to bid for rival wholesaler AF Blakemore, which has put its cash & carry operations on the market.

Last week, The Grocer revealed that Costcutter could also be involved in another big deal in convenience, while speculation continues to surround the future of Palmer & Harvey, with fresh reports this week that tobacco giants Imperial Brands and Japan Tobacco International had appointed advisors to look at the prospect of propping up the struggling wholesaler.