Member-owned Nisa Retail hires bankers to explore shock sale

The member-owned convenience store group Nisa Retail is exploring a shock sell-off that would underline the seismic shifts taking place across Britain’s food retailing industry.

Sky News has learnt that bankers at Lazard have been drafted in by Nisa Retail’s board to examine the potential to bring in outside shareholders to the business, which trades across about 3,500 UK stores.

The project is at an early stage, and may conclude without any radical changes to Nisa Retail’s ownership structure, according to insiders.

Currently, roughly 1,400 members hold up to 250 shares each in Nisa Retail, which they can use to vote on issues such as board appointments at its AGM.

Members are able to acquire additional equity up to the 250-share ceiling, although many members own far fewer than the maximum number.

It is unclear how a sale of the organisation could work, although one source described it as being "akin to a demutualisation".

Lazard is understood to have been asked to look at issues including the structure and potential value that could be achieved from external capital being invested in Nisa Retail.

Nisa Retail declined to comment on Sunday on its work with Lazard.

The project comes as the member-owned convenience store supplier finalises a £120m refinancing deal amid a shake-up of the sector which has been given extra impetus by Tesco’s proposed £3.7bn takeover of the wholesaler Booker.

Nisa Retail, which trades under brands such as Nisa Local, has seen its fortunes revived under Nick Read, who took over as its chief executive two years ago.

After losing almost £3m in 2015, Mr Read has launched an ambitious transformation plan which includes a target of growing sales to £2bn by 2019.

Last year, it recorded a £7.3m profit on sales of £1.3bn, enabling it to kick off fresh refinancing talks with lenders.

In 2017, the comparable earnings figure is expected to be £8.5m.

It grew its membership base by ‎a further 225 stores in the fourth quarter of its last financial year, and said last month that it was "in a positive position for the new financial year".

Some of Nisa Retail’s members trade under their own names, with the group supplying stock and retail support in return for a fee.

Despite the improved performance, Nisa Retail and rivals like Costcutter face challenging conditions, with growing competition from the major supermarket chains as well as discount-focused retailers.

Palmer‎ & Harvey, a delivered wholesaler which supplies Tesco and other big retail groups, has been put up for sale following a struggle to negotiate its own refinancing.

Last month, Sky News revealed that J Sainsbury was in the early stages of exploring a takeover of P&H.

News of Nisa Retail’s prospective sale came shortly after the Competition and Markets Authority said it had opened an initial inquiry into the Tesco-Booker deal.

Retail analysts expect the regulator’s probe to progress to a more detailed Phase 2 investigation, with rivals likely to argue against allowing the takeover to complete without significant concessions.

Britain’s convenience sector was valued at £37.5bn last year, according to Nisa Retail – a figure expected to grow to £41.9bn by 2021.

(c) Sky News 2017: Member-owned Nisa Retail hires bankers to explore shock sale