CO-operative retailer Scotmid is poised to expand its presence south of the Border after agreeing a deal to swallow a smaller peer in the Lake District.
The Edinburgh-based group, which owns almost 200 food stores across Scotland, hopes to complete the deal with Penrith Co-operative in the autumn, subject to member approval.
The firm already operates in England through its Semichem discount health and beauty chain, but subsuming the smaller Penrith business would mark its first move into food retailing outside Scotland.
Scotmid, headed by chief executive John Brodie, employs almost 5,000 staff. In addition to its retail operations, the society owns funeral and property businesses and has been seeking further opportunities to expand since buying the Botterills convenience store chain in 2010.
A spokesman for Scotmid said: “We’ve been working with Penrith over the past few years, helping it in areas such as governance, membership and IT.
“Being good co-operative neighbours, we have built up a good relationship. Taking this to the next stage seems the right thing to do.”
Penrith, owned by about 25,000 members and founded in 1890, is headed by chief executive John Mills with 179 staff and nine shops and Post Offices across County Durham and Cumbria, offering free food deliveries.
The society generated a turn-over of £13 million in the year to 7 January. That compares with annual sales of £428m at Scotmid, which has almost 250,000 members.
The deal, which the two firms are describing as a merger because no cash will change hands, would be the first for Scotmid since 2010, when it paid an undisclosed sum for the 51-store Botterills chain, which traded under the Spar banner.
The acquired stores were rebranded as Scotmid outlets, but the firm’s spokesman said it was too early to say whether the Penrith name would be retained.
Scotmid underwent a major diversification in 1995 when it bought Semichem, and four years later it acquired Northern Irish rival Options. The chain now has more than 140 stores in Scotland, Northern Ireland and the north of England.
In 2010 it launched its Fragrance House venture, selling designer perfumes and aftershaves from seven outlets in Aberdeen, Dundee, Falkirk, Glasgow, Greenock and Livingston.
Operating profits at the Scotmid group dipped from £6.5m to £6m last year, which Brodie blamed on a number of one-off factors, including the cost of a strategic review aimed at addressing “process” problems that had arisen from the various acquisitions.
Scotmid traces its roots back to 1859, when the St Cuthbert’s Co-operative Society was formed. It merged with the Dalziel Co-op in 1981, creating the Scottish Midland Co-operative Society.