Customer-owned energy co-op OK has secured a 50% share of Coop Denmark in a deal with the grocery chain’s owner Coop Amba, which has been looking for a partner to secure its finances.
As part of the agreement, the parties will inject two billion kroner (£270m) into Coop Denmark, to strengthen its grocery brands SuperBrugsen, Kvickly, Brugsen and 365discount. The money from Amba has been party raised from the sale of some of its other assets, including Coop Bank.
The agreement, which follows six months of talks, is set for final decision at Amba’s national council meeting on Friday 19 April. The co-op says the move will secure its finances and “once again make Coop Denmark competitive and profitable”.
Coop Denmark CEO Kræn Østergaard Nielsen, who is quitting the role once the deal is complete, added: “With OK, Coop Denmark has found the right partner. OK has a strong economy, we both have roots in the co-operative movement, and we already collaborate around OK’s fuel and electric charging stations. In addition, OK comes with strong competences in grocery retailing.”
The agreement means Amba and OK would share ownership on a roughly 50/50 basis. This might vary “depending on the development”, says Amba, but “OK will have decisive influence over Coop Denmark regardless of ownership shares“.
“The agreement ensures peace of mind about Coop Denmark’s finances,” said OK CEO Michael Løve, “and thus also about the many OK stations, charging stations and car washes, which in many cases are owned and operated on a franchise basis by Coop Denmark or the independent user associations.
“And we believe that the capital injection and the partnership can contribute to Coop Denmark finding its core in running a healthy grocery business centred on the classic and strong Coop brands.”
Under the agreement, Coop Denmark must bring in “simpler decision-making processes” to speed up its “ability to change and develop”.
The agreement is therefore a natural extension of Coop Denmark’s new governance structure,” said Amba, “where management rights over the business will unequivocally rest with the board of Coop Denmark A/S.”
Pernille Skipper, the new chair of Coop Amba, said: “The association’s basic task is to ensure good daily food for the Danes, and therefore it is only natural that the association must exist for the business. It is the first priority.
“At the same time, fortunately, we also agree that there is no Coop Denmark, as we would like it to be, without the co-operative, and that a clearer association and more attention to the values that make Coop something special also benefits the business.”
Related: Coop Denmark reports DKK 628m loss for 2022, its ‘worst year ever’
Amba and OK have drawn up a memorandum of understanding which formulates the framework and a common understanding for the future cooperation between the association and the business.
“Coop amba, with its two million members, must help ensure and underpin that Coop Denmark becomes profitable and activates potentially the most loyal and engaged customer base in the kingdom,” said Skipper. “It requires changes in both the business and the association, which I want to work to strengthen as a modern, active, outgoing and visible player.”
The move follows a run of poor performance for Coop Denmark, which has yet to publish its annual report for 2023 but warns “it is already clear that the accounts will not be satisfactory and on a par with the accounts for 2022”.
Coop Denmark’s chair Jeff Gravenhorst, who took the role last October to create a clearer focus on the business, said: “Over the past year, we have implemented major and necessary changes in Coop Denmark, but we need long-term investments and peace of mind to carry out a fundamental restructuring.
“With the new agreement, we will both have peace of mind about the economy, we can continue our efficiency improvements, and when the agreement has hopefully been voted through by the national council and approved by the competition authorities, we will together with OK implement a thorough restructuring plan”.
In connection with the agreement, a new board will be elected, which will take office when Coop Amba’s national council and the competition authorities have approved the agreement.
Gravenhorst continues as chair, while OK’s Løve takes over as deputy chair. In addition, the board will consist of OK CFO Thor Skov Jørgensen and two members of Coop Amba’s board, who will be elected at the beginning of May. A further two members are appointed by OK, just as the future board will also have four employee representatives as members.
“The board will be given significant capabilities within the grocery trade, and thus Coop Denmark will have a board that can drive the turnaround the business will have to go through in the coming years,” said Gravenhorst.
In addition to the capital injection, a new banking agreement has been negotiated in connection with the agreement with the four banks that form part of Coop Denmark’s existing banking syndicate.
As part of the focus on the core business and the existing strong brands, the rollout of new grocery stores under the name of the Coop chain will be discontinued.
“Our experience shows that customers prefer SuperBrugsen and Kvickly. We take the consequences of that and now focus fully on our well-known brands. It also means that the remaining Irma stores will become SuperBrugsen instead of Coop chain stores,” said Nielsen, who will resign as CEO as soon as the agreement is in place.
“I am happy and relieved that together with OK we have reached this important and decisive agreement, which secures Coop Denmark’s future,” he said. “But I am also convinced that it is best that Coop Denmark gets a new CEO with new energy and new perspectives when the agreement is fully in place.”
Responding to Nielsen’s decision, Løve said: “Kræn and I have previously worked closely together when we were both employed at Coop, and just like then, we have had a strong collaboration to land an agreement. I fully understand Kræn’s decision and have only respect for his way of doing it in the situation”.
Gravenhorst added: “Kræn is a team player, and for him the goal is never himself. I have experienced first-hand his dedicated efforts and steely will to find a solution to Coop’s challenges. This agreement has been successful, and I would like to say a big thank you to Kræn for that.”
Gravenhorst will act as acting chair of the board until a new CEO is found.
