Nisa members are pressing for more details about the proposed Co-operative Group takeover ahead of regional meetings next week which Nisa members, management and Co-op representatives will attend.
The aim of the six regional meetings, beginning in Scotland and ending in Northern Ireland, will be to explain the Co-op’s offer and clarify issues raised by a 20-page document Nisa Retail sent to its shareholders on October 10.
C-Store has obtained more details about the proposed deal which envisages buying all of the shares in Nisa for up to £137.5m.
The offer comprises a payment of up to £20,000 per shareholder, a deferred payment of up to £1,654 per share and an extra payment of up to 1% of rebateable sales for each shareholder during the four years to the end of March 2022, payable quarterly from June 30 2018 onwards.
The Co-op will take on Nisa’s net debt which was £105m as of July 2.
Nisa chairman Peter Hartley pointed out to retailers that the deal, if approved by Nisa members, would be subject to the approval of the Competition and Markets Authority but no Nisa member would be required to leave the group or divest of their stores.
“Co-op is not seeking to buy members’ stores, or the shares in their independent businesses. These will remain in your ownership,” wrote Hartley.
The offer will be made by way of a “Scheme Arrangement” within 28 days under the Companies Act 2006, which will require a minimum of 75% member approval (measured by value of the equity in the company) in two separate meetings.
A spokesman for the Co-op said: “We’ll be speaking directly with the Nisa members through a series of regional events that are being held across the country as of next week. There will also be a regular Q&A dialogue through their usual communication channels to ensure that all members receive and have access to the same information. We’ll also pick up questions members may have about their own stores through that process.”
Retailers want questions answered
“I urge all retailers to scrutinise all the details and ask all the right questions so we get all the necessary information. There may be questions I haven’t thought of, so we can all help each other.”
Nisa member Rav Garcha
Some retailers are adopting a wait-and-see approach, in the hope that their concerns will be addressed next week.
Several say they do not yet have all the information they need to scrutinise the proposed deal.
Rav Garcha, who runs five Nisa stores in the West Midlands, and is an independent board member of the Association of Convenience Retailers, was worried the information coming from Nisa was “one-sided” and wanted to evaluate “the other side of the coin”.
Some of his concerns were how the takeover would change the way retailers currently ran their business, how much real flexibility they would get, space issues in terms of coping with an increase in fresh products and how close proximity to a Co-op would impact.
“I urge all retailers to scrutinise all the details and ask all the right questions so we get all the necessary information. There may be questions I haven’t thought of, so we can all help each other,” said Rav.
Sid Ali, managing director of Nasco Retail, which has five Nisa stores in Aberdeenshire villages, said the offer was “quite well put together in that it offered a lot more incentive to members who had a smaller amount of shares”.
The previous offer from Sainsbury’s was worth more per share “but if you only had one share it wasn’t a lot”, said Sid.
He was not for or against the deal currently but wanted questions answered about the long term rather than merely in the next four years.
“I want reassurances that this is not a three or four-year deal and just a cheap way of buying out the competition.
“Most will have Co-op stores near them. Will we get access to the 5% dividend that Co-op customers get otherwise why would they buy Co-op brands from us?”
He thought the Co-op should pay more cash up front to compensate those who had a large amount of shares.
People who had 250 shares had approximately £40,000-worth and they were being asked to give that up for just £20,000 up front. “That’s not fair,” complained Sid.
He also questioned what would happen if there was a short supply of a particular product. “Would Co-op stores get preferential treatment? We need assurance on price and availability and that we won’t pay for the deal via increased prices. Surely prices should automatically come down with their buying strength,” he said.
Paul Cheema, co-owner of Malcolm’s Stores, Coventry, said: “We now need to understand what it means for the membership, what the promotion strategy is and the rebate. Until we see that everyone would be stupid to judge Nisa and the Co-op.”
It was not about the price of the shares but the longevity of the business and what the Co-op brought. “I do believe consolidation has to happen,” he added.
Russell Jenkins, co-owner of Milverton Stores in Taunton, Somerset, said members had been given “fairly bland assurances” about availability, the range of goods available and terms and conditions being unaffected “but we need to…get an idea in terms of pricing”.
“It will come down to eyeballing them in the meeting and looking at the character of the organisation,” he added.
A Nisa spokeswoman told C-Store that the Co-op intendded “to ensure that demand for Heritage products is supported and continuity of supply secured through any transitional period”.