Nisa sweetens Costcutter merger deal

By Anita Awbi

- Last updated on GMT

Related tags Shareholder Stock market

In a bid to head off stakeholder dissent, the Nisa-Today board has
offered members of its buying group a controlling share in the
merger deal with convenience chain Costcutter.

Following a crisis meeting last week the board has upped its offer to stakeholders from 40 per cent to a controlling 51 per cent, amid protests from the Nisa Members Association (NMA).

The NMA, consisting of more than 20 Nisa-Today members, formed in May to fight the proposed merger with Costcutter, fearing the deal will jeopardise the co-op's decision-making powers.

Concerns have focused on the ownership structure proposed in the deal, which originally suggested Nisa members would take a reduced share of their buying group, while Nisa and Costcutter management teams would take an equivalent share, with Icelandic investment bank Kaupthing taking the rest.

But under the new proposals, the combined management teams' stake will be reduced from 42 per cent to 31 per cent. Kaupthing, which bought a 20 per cent stake in Costcutter in February and which brokered the merger, now stands to take an 18 per cent stake in the group.

As yet it is unclear how the NMA plans to react to the new offer on the table.

Earlier this month the NMA sent a letter to shareholders around Britain protesting the merger, which would see the company change from a co-operative to be largely controlled by a board of directors.

In the letter to Nisa's shareholder base of 900, the NMA said: "We believe this (merger) may be the wrong way forward for our company, whose main purpose is to ensure shareholders get the lowest possible price of goods at maximum transparency."

The NMA urged for the development of an independent controlling association rather than a group of directors, whom allegedly stand to personally benefit from the £200m (€290m) merger.

However Nisa shareholders stand to get a £50,000 windfall from the deal and management on both sides say the merger would increase buying power, allowing the smaller grocery stores to compete more successfully with the likes of Tesco and Asda.

A vote of members which was planned for early July has now been put back to September.

It was announced in May that Nisa and Costcutter would join forces, but with both companies operating different management structures speculation has mounted over the logistics of the deal.

While Costcutter has always been a privately-owned business, Nisa is a mutually-owned firm where all members take a share of ownership when they join the group.

There are more than 900 retailers and wholesalers in the co-operative, running 5,000 shops around the UK.

Related topics Retail & Shopper Insights