The Co-op enters into exclusive £140m takeover talks with Nisa
THE Co-operative has entered exclusive talks to take over Nisa for £140m just two weeks after larger rival Sainsbury’s dropped out of the running.
Nisa had initially snubbed the Co-op’s interest in favour of the supermarket’s £130m offer, despite the former offering more money.
Sainsbury’s had said that it would not make its bid conditional on Nisa clinging on to a supply contract with Mccoll’s convenience chain, which accounted for around 35pc of its sales. While Sainsbury’s was in exclusive talks with Nisa it emerged that the convenience wholesaler had lost the Mccolls contract to Morrisons. However, the supermarket said it was pausing takeover talks because of concerns the competition watchdog would intervene.
It is understood that the Co-op is now proposing a Nisa takeover for the same price as it offered before – widely thought to be £140m – despite Nisa no longer having the Mccoll’s contract. Peter Hartley, the Nisa chairman, told members that the Co-op had wanted to move “as quickly as possible” and talks had been “pragmatic and constructive”. The failure to seal a previous deal with Sainsbury’s, however, prompted Mr Hartley to warn that there was “no guarantee that an offer will be forthcoming”.
The Co-op has just 6.1pc of the UK’S grocery market compared with Sainsbury’s 16pc, according to Kantar data, so has less market dominance.
Industry experts have remarked that the Co-op could be a better fit for a Nisa deal as its mutual status may appeal to Nisa’s 1,400 shopkeeper members who have previously opposed a loss of independence. “Given that they are both co-operatives, shareholders (many of whom are shopkeepers, and Nisa needs 70pc approval from them) in both companies are likely to prefer this option versus a potential Sainsbury’s acquisition,” said Molly Johnson-jones, senior analyst at Global Data Retail.
The Co-op could also help to improve Nisa’s fresh food offer following its trial to supply a range of branded fresh and frozen food products in 25 Mccoll’s shops. “The Co-op acquiring Nisa could extend their geographical reach, improve sourcing for both parties, and cut costs within their systems, creating the opportunity to offset inflation as it continues to affect suppliers and grocers,” added Ms Johnson-jones.
The Competition and Markets Authority is in the midst of a review of the convenience and wholesale market following Tesco’s £3.7bn swoop on Booker. Sainsbury’s became concerned the CMA’S narrow analysis could mean that any takeover of Nisa would also be tangled up in a regulatory review.
Tesco’s Booker deal, which will have far-reaching consequences for the nation’s corner shops, has prompted a wave of deal-making with Nisa being the first to hoist a “for sale” sign. Since then, cash-strapped wholesaler Palmer & Harvey has launched an urgent scramble for a new owner while Costcutter has said that it expects to announce a separate deal shortly.
Mr Hartley said in a letter to members: “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 longterm interest of members.”