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| Sainsbury's Nisa takeover talks paused after competition concerns | Sainsbury's Nisa takeover talks paused after competition concerns |
| (6 months later) | |
| Co-op could pounce on grocery wholesale group after supermarket cools on deal | |
| Sarah Butler and | |
| Zoe Wood | |
| Mon 14 Aug 2017 18.02 BST | |
| First published on Mon 14 Aug 2017 17.21 BST | |
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| Sainsbury’s exclusive talks on a £130m takeover of grocery wholesale group Nisa have ground to a halt over fears of intervention by competition authorities. | Sainsbury’s exclusive talks on a £130m takeover of grocery wholesale group Nisa have ground to a halt over fears of intervention by competition authorities. |
| The exclusive talks ended late last week after the Competition and Markets Authority expressed serious concerns about a similar, but much larger, merger between Tesco and the grocery wholesaler Booker. | The exclusive talks ended late last week after the Competition and Markets Authority expressed serious concerns about a similar, but much larger, merger between Tesco and the grocery wholesaler Booker. |
| An insider said: “Sainsbury’s has decided to pause discussions with Nisa until it better understands how the CMA would review any deal.” | An insider said: “Sainsbury’s has decided to pause discussions with Nisa until it better understands how the CMA would review any deal.” |
| The CMA referred the Tesco deal for an in-depth competition investigation in July and published full details of its “theories of harm” this month. The initial findings of the investigation are not expected until October. | The CMA referred the Tesco deal for an in-depth competition investigation in July and published full details of its “theories of harm” this month. The initial findings of the investigation are not expected until October. |
| But the CMA said the £3.7bn merger could potentially damage competition in 350 neighbourhoods as it suggested there was no clear distinction between chains owned directly by Tesco and the Budgens, Londis and Premier outlets it would become a major supplier to after the takeover of Booker. | But the CMA said the £3.7bn merger could potentially damage competition in 350 neighbourhoods as it suggested there was no clear distinction between chains owned directly by Tesco and the Budgens, Londis and Premier outlets it would become a major supplier to after the takeover of Booker. |
| Sainsbury’s is understood to remain interested in Nisa – which buys and distributes groceries for thousands of small independent stores, many of which operate under its brand name – and had not been put off by due diligence carried out in recent months. But sources said Nisa had also reopened talks with the Co-op, which had previously expressed an interest in a deal. | Sainsbury’s is understood to remain interested in Nisa – which buys and distributes groceries for thousands of small independent stores, many of which operate under its brand name – and had not been put off by due diligence carried out in recent months. But sources said Nisa had also reopened talks with the Co-op, which had previously expressed an interest in a deal. |
| Nisa’s chairman, Peter Hartley, wrote to the group’s owner members on Monday saying Sainsbury’s was still interested in potentially making an offer for the company but did not feel ready to do so until there was “greater clarity over the evolving regulatory and competition considerations”. | Nisa’s chairman, Peter Hartley, wrote to the group’s owner members on Monday saying Sainsbury’s was still interested in potentially making an offer for the company but did not feel ready to do so until there was “greater clarity over the evolving regulatory and competition considerations”. |
| He added: “Another party that had previously submitted a bid for your company has reaffirmed its interest in making an offer for Nisa and we are discussing this with them. | He added: “Another party that had previously submitted a bid for your company has reaffirmed its interest in making an offer for Nisa and we are discussing this with them. |
| “Our sector continues to change and evolve at pace, many of these changes will shape the convenience sector for the next decade and beyond. The board of Nisa continues to review any serious incoming queries and offers in the best interest of its members.” | “Our sector continues to change and evolve at pace, many of these changes will shape the convenience sector for the next decade and beyond. The board of Nisa continues to review any serious incoming queries and offers in the best interest of its members.” |
| Nisa, which is owned by its shopkeeper members who must vote to approve any deal, hired bankers this year to advise on its strategic options in light of the proposed Tesco-Booker alliance, which marked a potential major shift in UK convenience store retailing. | Nisa, which is owned by its shopkeeper members who must vote to approve any deal, hired bankers this year to advise on its strategic options in light of the proposed Tesco-Booker alliance, which marked a potential major shift in UK convenience store retailing. |
| It has kicked off a rush for consolidation in a highly complex market. Earlier this month, Morrisons signed a wholesale supply agreement with McColl’s, the chain that makes up about 35% of Nisa’s business. That deal will see McColl’s gradually withdraw from Nisa over the next year. | It has kicked off a rush for consolidation in a highly complex market. Earlier this month, Morrisons signed a wholesale supply agreement with McColl’s, the chain that makes up about 35% of Nisa’s business. That deal will see McColl’s gradually withdraw from Nisa over the next year. |
| Insiders said the Morrisons deal had not been a factor in Sainsbury’s decision not to make a bid for Nisa. It has been suggested that, while it made up a big proportion of sales, the contract was not a major profit driver. | Insiders said the Morrisons deal had not been a factor in Sainsbury’s decision not to make a bid for Nisa. It has been suggested that, while it made up a big proportion of sales, the contract was not a major profit driver. |
| Changing habits have shoppers move away from a weekly binge at big supermarkets towards picking up groceries in small local stores as and when they need them. | Changing habits have shoppers move away from a weekly binge at big supermarkets towards picking up groceries in small local stores as and when they need them. |
| But about 80% of the UK’s 41,000-plus convenience stores are independent or belong to buying groups such as Nisa or Costcutter, leaving major supermarkets out of this growth sector. | But about 80% of the UK’s 41,000-plus convenience stores are independent or belong to buying groups such as Nisa or Costcutter, leaving major supermarkets out of this growth sector. |
| Only Nisa remains owned by its shopkeeper members, who have a say over its running, including executive pay, rules governing the proportion of stock that members must buy centrally, and the price of goods. Its 1,400 member shareholders own between one and 250 shares out of almost 60,000 in total. | Only Nisa remains owned by its shopkeeper members, who have a say over its running, including executive pay, rules governing the proportion of stock that members must buy centrally, and the price of goods. Its 1,400 member shareholders own between one and 250 shares out of almost 60,000 in total. |
| Members, more than 70% of whom must be in favour for any deal to go ahead, have expressed disquiet over the potential Sainsbury’s deal which they believe would diminish their independence and control over their supply chain. | Members, more than 70% of whom must be in favour for any deal to go ahead, have expressed disquiet over the potential Sainsbury’s deal which they believe would diminish their independence and control over their supply chain. |
| One industry source said: “It could be that Sainsbury’s has read the runes that the membership is not happy about that transaction. They would rather remain a mutual.” | One industry source said: “It could be that Sainsbury’s has read the runes that the membership is not happy about that transaction. They would rather remain a mutual.” |
| Both Sainsbury’s and Nisa declined to comment. | Both Sainsbury’s and Nisa declined to comment. |
| J Sainsbury | |
| Retail industry | |
| Supermarkets | |
| Co-operative Group | |
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