Southern Co-op will “most likely” go into administration if members vote in opposition to the merger with Co-op Group, leading to retailer closures and jobs losses, it has warned.
CEO Ben Stimson and chair Janet Paraskeva issued the warning in a letter to members yesterday (22 April), as they have been “concerned that some of the conversations being shared online [do] not reflect the full picture”.
The letter aimed to present “a clear and open update” which laid naked the severity of its state of affairs and the extent of monetary assist it wanted to proceed buying and selling.
“Southern Co-op has made losses for the past three years,” they stated. “Over the final 12 months, buying and selling has change into tougher, and now we have relied on ongoing assist from our banks and suppliers to proceed working.
“That assist can’t now be elevated inside the time accessible. To proceed buying and selling without a merger, we would wish a big degree of monetary assist and now we have not acquired any gives of funding at that degree.
“If the merger does not go ahead, the most likely outcome is that Southern Co-op will enter insolvency through administration. This would put jobs at risk, lead to the loss of stores and negatively impact our suppliers.”
Potential to nominate directors
The society additionally created a comparative desk that highlighted every probably final result if members voted for or in opposition to the merger.
If members voted ‘no’ or didn’t vote, Southern Co-op stated it might be unable to proceed working independently and an exterior administrator can be appointed to grasp values for collectors. It additionally stated there would probably be important job losses, potential retailer closures, and member affect and determination making can be misplaced.
If members voted in favour, alternatively, the merger would supply “immediate financial stability”. It added that extra jobs can be saved, shops would stay open, and member worth can be protected inside a continued co-operative construction.
The proposal for the societies to hitch forces was announced earlier this month. The landmark merger would create an organisation with gross sales of circa £11.5bn, virtually 2,500 shops and over 800 funeral houses.
According to a member data pack on its web site relating to the proposal, Southern Co-op had applied a spread of mitigating measures over the previous few months to stabilise the enterprise, together with promoting or closing retail shops that have been not worthwhile, freezing recruitment at head workplace, lowering its workplace house from 17,000 sq ft to 10,000 sq ft, and holding its capital spend “at the lowest possible level”.
However, none of these choices “created the runway we need to survive as we are”, it stated. With gross sales falling, and working losses (topic to audit) in extra of £20m within the subsequent monetary 12 months (to January 2026) owing to “the malicious cyberattack on the Co-op Group last year”, the proposal to hitch forces with Co-op Group was the one viable choice on the desk for survival, and would enable Southern Co-op to “combine strengths, grow sustainably and broaden the range of services available to members”.
An preliminary vote on the proposals shall be held at a particular normal assembly on 6 May. A second SGM shall be held on 21 May and the outcomes of the vote are anticipated to be introduced on the identical day.
