McColl’s Retail Group has agreed to purchase 298 convenience stores from the Co-operative Group for £117m.
Because of the size of the acquisition, the deal is subject to approval by shareholders, and also by the Competition and Markets Authority (CMA). The proposed purchase will be made in cash, with McColl’s placing an additional 10.5m shares into the market to help finance it.
McColl’s currently operates 933 convenience stores, and expects the initial tranche of stores to transfer ownership in January 2017, with the remainder being acquired in batches of 20 per week over a five-month period. City reports in April suggested that the Co-op Group was looking to offload 300 stores that no longer fitted into its strategic focus on food.
The stores under consideration are located in residential areas throughout the United Kingdom, with an average store size of 1,727sq ft. According to McColl’s, 116 of the stores are freehold properties, 172 stores are leasehold properties and the remaining 10 stores are mixed freehold/leasehold properties. The average remaining term of the leases for the stores on leasehold properties is between six and seven years.
The average weekly sales of the new stores (2015) is £22,800 and the average basket value is £4.98, with 38 stores containing post offices and 252 with ATMs. The transaction affects around 3,800 store employees, who will automatically transfer to McColl’s under the TUPE agreement.
McColl’s Retail Group chief executive Jonathan Miller commented: “I am delighted to announce the acquisition of 298 quality convenience stores in a transformational deal for McColl’s. This opportunity substantially accelerates our growth strategy and expands our neighbourhood presence for the benefit of our customers.
“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.”