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Co-op sells farms business to Wellcome Trust Co-op sells farms business to Wellcome Trust
(about 7 hours later)
The Co-operative Group has sold its farms business to the Wellcome Trust, calming fears that swaths of British farmland would fall into foreign hands. The troubled Co-operative Group has sold its farms business to the Wellcome Trust for £249m in the latest attempt by the debt-laden mutual to shore up its finances.
The charitable foundation bought the 16,000 hectares (40,000 acres) of land for £249m, which the Co-op said would be used to cut debt and invest in its remaining businesses. The charitable foundation bought the 16,000 hectares (40,000 acres) of land, 15 farms and around 130 residential and commercial properties, which the Co-op said would be used to cut debt and invest in its remaining businesses.
The Co-op, which reported losses of £2.5bn in the year to April 2014, said the sale reflects the new focus on its food, funeralcare, general insurance and legal services businesses. It comes shortly after the group offloaded its pharmacies business for £620m. The sell-off was a key part of the strategy put in train by Euan Sutherland, the former chief executive who quit in March when details of his £6.6m two year pay deal were leaked. The business, which reported losses of £2.5bn in the year to April 2014, is now focusing on its supermarkets, funeral homes, general insurance and legal services arm after offloading its pharmacies business for £620m. The UK's largest mutual still has the for sale tag hanging over its securities business, Sunwin, as it scrambles to raise cash to reduce its debt.
The Wellcome Trust has a large investment portfolio, including property worth £1.8bn, which helps fund its charitable work to drive improvements in human and animal health. The farm sell-off has created controversy as some critics fear it will end more than 100 years of ethical farming by the Co-op. The Wellcome Trust said it would be a responsible landowner, although it will not sign up to the Co-op's ethical guidelines.
Critics of the sale fear it will end more than 100 years of ethical farming by the Co-op in its farms and at three packhouses across England and Scotland which process cereals, fruit, vegetables and honey. The Wellcome Trust said it would be a responsible landowner although it would not sign up to the Co-op's ethical guidelines.
Peter Pereira Gray, managing director of investments at the Wellcome Trust, said: "The Co-operative has its own form of ethics; we wouldn't necessarily seek to be exactly replicating theirs. We have our own very high standards."Peter Pereira Gray, managing director of investments at the Wellcome Trust, said: "The Co-operative has its own form of ethics; we wouldn't necessarily seek to be exactly replicating theirs. We have our own very high standards."
The Wellcome Trust said it intends to keep on the farms' 240 staff. The 16,000 hectares of land produce potatoes and fruit among other crops and the farms sell produce to Co-op food stores, among other customers, and will continue to do so following the sale. The Wellcome Trust has£1.8bn of property investments while its charity focuses on human and animal health.
Interest in UK farmland remains high, due largely to fears over food security. Pereira Gray said: "Mark Twain's remark that 'they are not making any more land' is a good underpinning reason why farmland is attractive." He said the Co-op land is "on the whole" of very high quality. It said it would continue to employ the Co-op farm unit's 240 staff. Some 70% of the Co-op farm production is cereals sold to other companies and the Co-op argues that just 2% of the produce, mainly potatoes, goes to its food stores.
The Co-op insisted early on that it wanted a single major corporate buyer, arguing this would best preserve the jobs of those employed on the farms. That angered campaigners, which hoped the Co-op would consider community farm buyouts. The farms will continue to sell produce to the Co-op. "We are buying it as a going concern; we hope to maintain all the relationships both with suppliers and customers," Pereira Gray said. He added that the Wellcome Trust's "way of working would be more responsible than those looking to make a quick profit". The trust has pledged to maintain existing services for local communities, such as the educational programme for children – "Farm to Fork".
There will be some relief that the land has not fallen into foreign hands. In a similar vein to central London property, farmland is now seen as a safe bet by foreign investors. The value of prime British farmland has risen 273% to an average price of £21,500 per hectare over the past decade, according to Savills. The Co-op insisted early on in the sake process that it wanted a single major corporate buyer, arguing this would best preserve the jobs of those employed on the farms. That angered campaigners, who had hoped the Co-op would consider community farm buyouts. Acknowledging wide interest in farmland as an investment, Pereira Gray said: "Mark Twain's remark that 'they are not making any more land' is a good underpinning reason why farmland is attractive." He said the Co-op land is "on the whole" of very high quality.
There will be some relief that the land has not fallen into foreign hands. Prime British farmland is seen as a safe bet by foreign investors, having risen in value by 273% over the past decade to an average price of £21,500 per hectare, according to Savills. It is understood that the Co-op achieved a price of £26,500 per hectare with this deal.
The Wellcome Trust has owned agricultural land for many years but this deal represents a huge increase in its holdings. Pereira Gray said: "This is a different scale of acquisition for us."The Wellcome Trust has owned agricultural land for many years but this deal represents a huge increase in its holdings. Pereira Gray said: "This is a different scale of acquisition for us."
The Co-op started buying farms in the late 19th century to ensure a supply of food for its grocery stores and has built up the largest lowland farming business in the UK.
The overhaul of the UK's largest mutual is taking place amid attempts to embark on sweeping changes to the way the business is run. A special general meeting of members is expected to be called over the next four weeks - just after the group publishes its interim results - to vote on changes to the boardroom structure and the way members' voices are heard in the organisation.
As soon as this week, the outline of the reforms to be put to the member vote could be published. The proposals are expected to include changes to the ideas recommended by Lord Myners, the former City minister called in by Sutherland to overhaul governance. Myners, who quit in the face of opposition to his reforms, had said the board should no longer be made up entirely of elected members of the Co-op and should comprise members of the management and independent non-executives.
However, concessions are expected to be offered to allow elected members to sit on the board. Transitional arrangements for the new board could mean that existing members, including chair Ursula Lidbetter, retain their positions on a "senate" overseeing the board until May 2016.