Co-op sells 298 small shops to McColl's

Newsagent-style shops sold to convenience store group for £117m as Co-op seeks larger premises for new outlets

The Co-operative Group has sold 298 small shops to convenience store specialist McColl’s Retail Group for £117m.

The deal, which is subject to approval by the competition watchdog, leaves the Co-op with about 2,450 stores after the sale of 100 properties including 36 stores to Hilco in May.

Earlier this year, the mutual appointed the investment bank Rothschild to find prospective buyers for about 300 shops, equating to nearly 10% of its estate, as it tries to keep a lid on debt and expand and modernise its successful convenience store business.

Steve Murrells, chief executive of the Co-op’s food division said: “Today’s announcement is completely in line with our strategy, as these stores did not allow us to provide a sufficiently compelling own-brand offer for our members going forwards. The proceeds will be reinvested to drive sustainable growth for our members.”

All 3,800 Co-op staff working in the stores being bought by McColl’s will transfer over when the handover of stores is finalised in November.

The Co-op is aiming to open 100 new stores this year and a similar number next year but wants stores larger than the average 1,700 sq ft newsagent-style premises it is selling to McColl’s. It recently bought six outlets from administrators to My Local, the convenience chain which went bust last month.

McColl’s, which listed on the London Stock Exchange in 2014, said it would be placing 10.5m shares to existing investors to raise £13.1m to help fund the acquisition of the Co-op stores. The size of the deal for McColl’s also means it will have to seek approval from shareholders.

Jonathan Miller, chief executive of McColl’s, said: “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.”