McColl’s Retail Group has agreed to buy 298 stores from the Co-op in a “transformational” £117m deal.
The sale, subject to approval by the CMA and McColl’s shareholders, will accelerate McColl’s continued move away from CTNs and towards neighbourhood convenience stores. McColl’s will acquire stores in batches of 20 a week over the next five months. The first stores will officially change hands in January. If the deal goes ahead, c-stores will represent three-quarters of McColl’s 1,231-strong estate - up from two thirds.
“The stores are a perfect fit for our business,” said McColl’s COO Dave Thomas. “We’ve been buying 60 independent convenience stores per annum since we floated on the London Stock Exchange in 2014. We’ve also been converting 45 of our newsagents every year.”
With 1,231 stores now under its belt, the retailer has “significantly moved on from” its target to have a 1,000-strong portfolio by the end of 2016, he added.
The majority of stores, which are about 1,700 sq ft, are located in England and Wales. But there are also 59 in Scotland and five in Northern Ireland, which represents a new territory for the group.
“That will be a new venture for us and we’re very excited to have a look at those stores,” said Thomas.
Currently, McColl’s stores are jointly supplied by Nisa and Palmer & Harvey but the group is using the approval period to consider new suppliers.
“We’ve got an open mind,” said Thomas. “We certainly want a really strong fresh offer from whoever we decide to go with.”
McColl’s also bought two My Local sites in Banbury and Bath before the retailer slipped into administration, The Grocer can reveal.
“We felt they were two good opportunities which are now up and running as McColl’s stores,” said Thomas.
McColl’s will place 10.5 million shares to existing investors, to raise £13.1m, for the sale. As The Grocer went to press on Thursday, shares were up 23% since the announcement the previous day.
The Co-op said the sale of the stores was consistent with its growth strategy of focussing on convenience stores that could deliver a “compelling and convenient shopping experience”. The proceeds would be re-invested in delivering that aim, with 100 new store acquisitionss targeted in 2016, in addition to the 200 it has opened in the past two years.
All staff will transfer over under TUPE rules and McColl’s said it was “very excited and enthusiastic” about gaining the new employees. Steve Murrells, CEO of Co-op Food, said the stores, which average 1,700 sq ft, were not big enough to “provide a sufficiently compelling, own-brand offer for our members”.
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