Morrisons has beaten the owners of Asda in the race to buy McColl’s after the struggling convenience store chain fell into administration.
Morrisons’ final offer for McColl’s was selected ahead of an improved bid made over the weekend by EG Group, the petrol forecourts operator owned by the Blackburn-based Issa Brothers, who also own Asda.
All 16,000 McColl’s staff will be transferred to Morrisons, while all of the Scotland-based retailer’s 1,160 UK convenience stores and newsagents will continue trading. Morrisons has also agreed to rescue the company’s two pension schemes, which have about 2,000 members.
McColl’s was sold via a pre-pack administration, after the retailer’s lenders, which include Barclays, HSBC and partially state-owned bank NatWest, declined a request to restructure its debt, sparking a bidding war for the London-listed company.
Morrisons, Britain’s fourth biggest grocer, had an existing supply agreement with McColl’s, for which it provided a range of products under the Safeway brand. Morrisons is owned by the the US private equity group Clayton, Dubilier & Rice, which won a takeover battle for control of the chain last year.
The professional services firm PwC was appointed as administrator to McColl’s on Monday, and sold the company’s business and assets to Alliance Property Holdings, which is part of the Morrisons group.
The administration process was initiated by McColl’s board on Friday, after the group’s lenders withdrew their support for the business, pushing it into administration. The lenders will now be repaid in full following the sale to Morrisons.
Morrisons is understood to have previously offered to take on McColl’s as a going concern, which would have included assuming its debts and responsibility for its pension scheme.
David Potts, Morrisons chief executive, said he had hoped to buy the business before it collapsed into administration. “Although we are disappointed that the business was put into administration, we believe this is a good outcome for McColl’s and all its stakeholders. This transaction offers stability and continuity for the McColl’s business and, in particular, a better outcome for its colleagues and pensioners,” Potts said.
The majority of McColl’s stores trade under its brand name, although some 270 of the shops currently operate as Morrisons Daily outlets.
Morrisons said its wholesale supply agreement with McColl’s would now continue without interruption, and Potts said the retailer now intended to build on its Morrisons Daily store format.
As part of its winning offer, it is understood that Morrisons agreed to waive the money it was owed by McColl’s – thought to be as much as £150m – thereby allowing the administrators to distribute more money to other unsecured creditors.
Initially, it had looked as though EG Group, owned by the brothers Mohsin and Zuber Issa, was leading the race to buy McColl’s, after offering to repay its lenders in full. However this bid was subsequently matched by Morrisons.
Toby Banfield, Rachael Wilkinson and Rob Lewis of PwC were appointed as joint administrators of McColl’s on Monday. Lewis said the sale to Morrisons provided “much-needed certainty to McColl’s 16,000 staff after a period of understandable concern following the group’s challenges over the past months”.
He added: “As well as saving thousands of jobs, this deal secures a platform for the trustees of the group’s pension schemes to enter into arrangements which will protect the pensions entitlements of so many people.”
McColl’s had been suffering from financial pressures for some time before its collapse into administration. It was hit by supply chain difficulties during the pandemic, resulting in gaps on the shelves and poor sales.