The Co-op Group has swooped in to top Sainsbury's in the battle for convenience chain Nisa.
After positive discussions over recent weeks, Nisa chairman Peter Hartley today said it had granted Co-op a period of exclusivity.
Hartley said Co-op had confirmed, subject to further due diligence, its intention to move forward as quickly as possible to finalise the transaction.
"The Co-op is willing to incur costs on its own account to do this," Hartley said in a statement to shareholders.
Sainsbury's paused discussions with Nisa earlier this month as it waited for the result of the competition watchdog's report into Tesco's takeover of Booker. However, it is understood the Sainsbury's deal is not off the table.
Shares in Sainsbury’s closed up 2.21 per cent today, indicating that investors were pleased to see a takeover of Nisa by the supermarket becoming less likely.
Phil Dorrell, a partner at consultancy Retail Remedy, told City A.M.: "Co-op are probably a better fit and in a better position to be able to turn it round. I think Sainsbury's needs a year and a half or maybe two years of consolidating what's happening with Argos, and integrating Tui into Argos."
Sainsbury's took over Argos parent Home Retail Group last year and is still integrating the business with its own.
“Sainsbury’s has got other things on its plate,” agreed Bruno Monteyne, an analyst at Bernstein. “It will be a good deal for Co-op if they don’t pay too much for it and the business isn't too damaged by losing McColl’s.”
Nisa lost a supply deal with convenience chain McColl’s, one of Nisa’s biggest customers, to Morrisons earlier this month.
Co-op was one of the early suitors for Nisa, and re-entered the picture just last week when a period of exclusivity granted for a possible bid from Sainsbury’s expired.
It is understood that Co-op is sticking with an initial valuation of almost £140m for the convenience chain, despite the original offer being dependent on Nisa retaining the McColl’s contract.
At least 50 per cent of Nisa’s shopkeeper members will need to approve any takeover. Concerns had been raised over the Sainsbury’s bid by some members, who feared Nisa would be demutualised. But it is thought there will be less opposition to a Co-op deal given the company’s member-owned status.
Key elements of the discussion are ongoing, and Nisa said it will continue to focus on resolving talks in a satisfactory manner for shareholders.
Hartley said Co-op could be in a position to make a final offer for Nisa following the period of exclusive due diligence.
Thereafter, and subject to the results of the due diligence, it is anticipated that 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.
A spokesperson for Co-op confirmed the period of exclusivity, which they said will "provide the opportunity for us to carry out more detailed due diligence in the coming weeks".
"Following this period and subject to approval from our board, we hope to be in position where we can put forward an offer to Nisa members," Co-op's spokesperson said.
Given that Nisa's AGM is not scheduled until December, a member vote could be called earlier in the year, if Co-op chooses to make a final offer.
Sainsbury's declined to comment.