Co-op Group in discussions to sell 100 former Somerfield stores

The Co-operative Group is reported to be looking for a buyer for 100 former Somerfield properties. The Group, which has over 4,600 outlets across the UK, bought Somerfield in...

The Co-operative Group is reported to be looking for a buyer for 100 former Somerfield properties. The Group, which has over 4,600 outlets across the UK, bought Somerfield in 2008 for £1.6bn with the intention of strengthening its position in the retail market by adding 800 shops to its estate.

However, in order to finance the Somerfield acquisition, the Group borrowed on the market. In 2013 the Co-op reported a £2.5bn loss, determined by a crisis at the Co-operative Bank as well as huge write-downs in the value of the Somerfield business. Since then, the Group has sold its agricultural and pharmacy businesses, and retains only a 20% stake in the bank.

According to Sky News, the Group is looking to sell 41 large supermarkets and 56 other sites, which do not trade under the Co-op Food brand. Of the 56 properties, two thirds are currently being leased to third parties and the rest have been closed.

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Richard Pennycook
Richard Pennycook

Sky News reports that the stores to be sold by the Group are expected to make a profit of over £1m for 2015, while the net cost of the remaining sites could reach £14m. The Telegraph claims the Co-op is in discussion with My Local, which acquired Morrisons’ convenience stores last year, and turnaround firms Hilco and Gordon Brothers.

In 2014, the Group set up a three-year rebuild programme with the aim of restoring the retailer and achieving long-term success. Announcing the Group’s interim results last year, chief executive Richard Pennycook revealed that the retailer would continue to focus on convenience stores and would seek to dispose of 200-300 big stores over the coming years. He also confirmed that the revenue generated from the sales would be invested in the business.

The Co-op has increased its market share from 4.2% in 2008 to 5.9% in 2016, and in February was listed by market researcher Kantar Worldpanel as the fastest growing non-discounter in the UK grocery market for the first time since 2011.

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