Co-op Group to offer £40m ‘dowry’ to Somerfield stores buyers

The Co-op is looking to sell the stores it has acquired from Somerfield and is offering a £40m case dowry to bidders. According to Sky News, the Group...

The Co-op is looking to sell the stores it has acquired from Somerfield and is offering a £40m case dowry to bidders.

According to Sky News, the Group is in exchange asking potential buyers to keep scores of stores trading for at least three years. The Co-op is said to be in discussion with My Local, which acquired Morrison’s convenience stores last year, and turn-around firms Hilco and Gordon Brothers.

In 2015 the Group announced it would seek to dispose of 200-300 big stores over the coming years. This move is part of the Co-op’s three-year rebuild programme set out in 2014, with a clear strategy in place anchored on convenience. The society also confirmed that all actions taken would be in support of the long-term strategy.

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

The retailer’s food division has improved performance, with like-for-like sales growth of 0.8% in the first months to July 2015. In the convenience sector the Group witnessed a 3.3% growth in sales. One source said the Group’s positive results placed it in a good position to seal a financially positive deal and it was not being forced into the sale of the estate.

The Co-op's increase is impressive considering Aldi and Lidl are currently taking most of the gains from Co-op’s competitorsThe Group is looking to sell 41 large supermarkets and 56 other sites, which do not trade under the Co-op Food brand. Two thirds of the 56 properties are currently being leased to third parties and the rest have been closed. The stores are expected to make a profit of over £1m for 2015, while the net cost of the remaining sites could reach £14m.

Currently, the Co-op has 4,600 outlets across the UK. Since buying Somerfield in 2008 the Group has increased its market share from 4.2% to 5.9% in 2016. In 2013 the Group reported a £2.5bn loss mainly due to the takeover of the Britannia building society and the write-downs in the value of the Somerfield business. Since then it has sold its agricultural and pharmacy businesses. It now retains only a 20% stake in the bank.

The Group returned to profit in 2015 after strong performance in the convenience sector and funeral homes.

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