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Co-op to sell off farms after '£2bn losses'

CO-OPERATIVE Group's three farms in Scotland are to be sold and the future of its 60 pharmacies are uncertain as the mutually owned business seeks to rebuild from big losses in 2013.

BIG JOB: Co-operative Group chief executive, Scot Euan Sutherland, has the task of overhauling the banking arm.
BIG JOB: Co-operative Group chief executive, Scot Euan Sutherland, has the task of overhauling the banking arm.

The Co-op has 15 farms across the UK, including in Perthshire, the Borders and Aberdeenshire.

The business also has packhouses at Carnoustie and Longforgan, both near Dundee, which will be put up for sale with the rest of its farming arm.

A Co-op spokesman said: "As part of the wider strategic review of all of its businesses, the Co-operative Group has decided that its farms are non-core and has started a process that is expected to lead to a sale of the business.

"In addition, it is exploring options for the future of the pharmacy business; this could include the sale in whole or part of the business."

The sales are part of a restructuring at the Co-op, which has 475,000 members in Scotland, after it was hit by the discovery of a £1.5 billion capital hole in its banking business. This emerged after it failed to pull off a planned acquisition of 631 branches from Lloyds Banking Group, which included Lloyds TSB Scotland.

Euan Sutherland, a Scot who was previously an executive at B&Q owner Kingfisher, joined the Co-op as chief executive in May and has had to overhaul the Co-op Bank.

This has seen bondholders, including some US hedge funds, take majority control.

To shore up its finances, Mr Sutherland plans to sell the Co-op's farming business which dates back to 1896 and covers around 50,000 acres in England and Scotland.

The group has 1226 hectares of leased and owned land at Monymusk, near Inverurie in Aberdeenshire, which it uses for arable farming.

It also has 1176 hectares of owned and leased land at Blairgowrie where the group grows crops and fruit.

At Duns in Berwickshire, the Co-op uses 2015 hectares of leased land for arable farming.

Its packhouse at Longforgan specialises in fruit while potatoes are packed at Carnoustie.

However, the farming business contributes only a small proportion of the food sold in the Co-op's stores. The pharmacy arm, which was established in 1945 and has 750 outlets across the UK, has come under pressure from attempts by the Government to cut the cost of prescriptions. The business employs 6500 people.

Other businesses in the Co-op group include funeralcare, legal services, travel and general insurance.

News of the divestments came as it was reported that the Co-op would post a loss of more than £2bn for 2013, the worst in its history, when it releases its results on March 26. It is expected to cut up to 5000 jobs in the next three years to slash costs. Currently, around 11,000 of its 90-000 employees are based in Scotland.

The Co-op's losses are expected to come mostly from its banking business although it is also likely to take a writedown on the value of the stores it acquired in a £1.6bn deal in 2009 to take over the Somerfield grocery chain.

A loss for 2013 was expected after the group booked a pre-tax loss of £559 million for the first half of the year including a loss of £709m from its bank. It reported a full-year loss for 2012 of £599m.

The group has 4500 food stores including 400 in Scotland.

Mr Sutherland admitted earlier this month that it had lost touch with its customers and eight million members and launched a national survey on its future strategy.

Tom Raynham, head of agriculture investment at property consultancy Knight Frank, said there would be interest in the farms due to a shortage of good land.

"The market has really been crying out for some quality land for investors to buy," Mr Raynham said.

"It's quite a varied portfolio of farms so they're more than likely be sold to a number of buyers."

The Co-op had planned to sell its general insurance arm to assist the bailout of its bank but scrapped that plan in January, saying it didn't need to raise as much capital as first envisaged.

The group faces several inquiries into what went wrong at the bank.

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