FIRST Choice is planning to take full control of Holiday Hypermarkets by paying around £50m for the stakes owned by United Norwest and West Midlands Co-ops.
United Norwest and West Midlands, which each own 37.5% of Holiday Hypermarkets, have agreed in principle to sell their shareholdings. First Choice already owns the remaining 25%.
First Choice is keen to tie up a deal quickly and make an announcement at its annual results meeting tomorrow. The company’s share price is expected to rise sharply if it can tell the City that it has taken control of a major area of distribution.
However, First Choice faces competition from other operators and industry observers believe there is an outside chance that the Co-ops could sell their stakes to Airtours or Thomas Cook, both of which have expressed an interest.
First Choice has been impressed by the success of Holiday Hypermarkets, which has grown rapidly under managing director John Donnelly and will open its 21st store by Christmas.
The Walsall branch, the first in the Hypermarket chain, turned over £20m in retail sales and £11m in foreign exchange in the year to October 30, compared with many traditional high-street shops which turn over retail sales of less than £5m.
The Hypermarkets are also strong supporters of First Choice. Around 40% of the retailer’s in-house business is for the First Choice group, including Unijet, but this could rise significantly if the operator becomes sole owner.
First Choice is also expected to expand the Hypermarkets rapidly if it takes full control. It currently has a commitment to fund 26 sites by May.
A city source said:”If First Choice can do a deal and start heavy directional selling through the Hypermarkets, then it will soon look like a very sound investment.
“It’s all very well First Choice having a 25% stake but it needs to take full control to make a real impact.”
Donnelly and West Midlands Co-op chief executive said they could not comment on any rumours.
United Norwest, First Choice and Airtours also declined to comment. However, Thomas Cook retail managing director Andrew Windsor denied they were interested in Holiday Hypermarket. “We are happy with the development of our own Thomas Cook Plus shops,” he said.
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