Is a Co-op bid for Nisa on the cards?

The Co-op has emerged as the new frontrunner to buy Nisa, with the prospect of a deal being on the table within a few weeks.

Nisa chairman Peter Hartley wrote to retailers yesterday saying the member-owned wholesaler/retailer group has held a “number of positive discussions” with the Co-op.

“During these discussions the Co-op has confirmed, subject to further due diligence, its intention to progress matters as quickly as possible, in the hope that a transaction can be finalised,” said Hartley.

The Nisa board has granted the Co-op a period of due diligence.

Hartley said: “It is anticipated the Co-op could be in a position to make a final offer to the members for your consideration. Should an offer of merit emerge from this process, it will be for you, the members, to decide on whether to accept it. However, it is important to stress, that there is no guarantee that an offer will be forthcoming.”

Hartley said “key elements” of the discussions with the Co-op were ongoing. It is believed one of the sticking points to the original approach by the Co-op, the Nisa supply contracts with McColl’s, might not now be so problematic now that Morrison’s is to take over that contract.

It was the loss of the MColl’s contract, along with the competition authorities’ longer-than expected probe into the Booker/Tesco merger proposals, that has led Sainsbury’s cooling its interest, according to analysts.

Molly Johnson-Jones, senior analyst at Global Data Retail, said a Co-op and Nisa partnership would provide more benefits than a takeover by Sainsbury’s due to ‘complementary business models, supply chains and customer requirements’.

“Speculation that Co-op would bid for Nisa had been circulating since Sainsbury’s pulled out of the potential acquisition amid fears of competition issues, stating they would wait for the CMA’s verdict on Tesco-Booker before they moved forward.

“Co-op’s move may therefore seem like bad news for Sainsbury’s, but given the lack of compatibility between Nisa and Sainsbury’s, it could be a lucky escape. Sainbury’s is a mid- to high-end supermarket with a customer base that does not overlap as neatly with Nisa’s as Morrisons’ does with McColl’s, for example.

“In addition, Sainsbury’s lacks any vertical integration in its supply chain, so the added benefit of finding supply chain efficiencies, which exist for Tesco and Morrisons in their respective wholesale partnerships, does not exist.

“The CMA,” she said, “is less likely to object, or take issue with, a deal between the Co-op and Nisa as their combined market shares are lower than Sainsbury’s at 12%. Therefore, scale purchasing benefits are less market-influencing as they might be with a ‘big four’ partnership.

“Also, given that they are both co-operatives, shareholders in both companies are likely to prefer this option versus a potential Sainsbury’s acquisition.”

Johnson-Jones added: “The figure of £140m as the Co-op’s upper limit for the acquisition is surprising as Sainsbury’s was reportedly offering £130m. It may signal Co-op’s desire to move as quickly as possible, or the greater number of synergies that could come from a Co-op-Nisa partnership over a Sainsbury’s-Nisa partnership.

“The Co-op acquiring Nisa could extend their geographical reach, improve sourcing for both parties, and cut costs within their systems creating the opportunity to offset inflation as it continues to affect suppliers and grocers,” she said.

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