Morrisons swoops to the rescue of convenience store group McColl’s in deal that saves over 1,100 stores and 16,000 jobs
Morrisons has won the battle to buy McColl’s in a rescue deal that saves over 1,100 stores and 16,000 jobs.
The supermarket chain beat off competition from rival EG Group, the petrol station giant owned by the billionaire Issa brothers who also control Asda.
The deal saw the debt-ridden convenience store group sold to Morrisons in a so-called ‘pre-pack’ deal after tumbling into administration.
Rescue: Morrisons beat off competition from rival EG Group in the battle to buy McColl’s in a deal that saves over 1,100 stores and 16,000 jobs
Morrisons and EG were locked in a two-way battle for the convenience store chain and submitted their final offers over the weekend.
Morrisons triumphed with an offer that includes keeping all 1,160 McColl’s stores and its 16,000 workers.
The supermarket will also honour the collapsed firm’s pension obligations and repay all of its lenders in full, a key demand in the rescue negotiations.
‘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.’ said Morrisons boss David Potts.
He added that the deal offered ‘stability and continuity’ for the business as well as ‘a better outcome’ for McColl’s workers and pensioners.
Morrisons is one of McColl’s largest creditors which is thought to have been influential in discussions over the deal.
The grocer is also McColl’s sole supplier, with the company operating hundreds of stores under the Morrisons Daily brand.
The deal was a blow for EG, which late last week appeared to have all but secured its takeover of McColl’s before Morrisons gatecrashed the process with its own last-minute bid over the weekend.
A spokesman for EG said it hoped the acquisition would ‘bring to an end the uncertainty for the hard-working colleagues at McColl’s’ but added its proposal would have safeguarded jobs, increased hourly pay for staff aged 18 and over and maintained ‘invaluable community services’ such as Post Office counters.
The deal is structured as a pre-pack administration, meaning Morrisons immediately bought McColl’s once it formally entered an insolvency process overseen by accountancy firm PwC.
It also ends a torrid period for the corner shop chain, which over the last 12 months saw its share price collapse amid a series of profit alerts and warnings around shortages of key products, lorry drivers and distribution centre workers.
The decision to place the group into administration, a key condition of the takeover offer from EG, was initially condemned by Morrisons as ‘disappointing, damaging and unnecessary’.
However, it was thought that PwC had been left with little time to draw up a takeover for McColl’s while the firm was still solvent as it teetered on the brink of collapse.
Morrisons made a previous offer for McColl’s that would have seen it take on the firm’s debts and repay them over time, as well as protecting the ‘vast majority’ of staff and stores and its £141million pension plan.
But this was rejected by lenders in favour of EG’s initial approach. The snub caused Morrisons to return with an improved offer, followed shortly after by EG’s own last-gasp bid.
The commitment to honour pensions also became a hot button issue as the dramatic bidding war reached its climax.
Trustees of the McColl’s pension scheme wrote to the Issa brothers demanding EG Group support its pension commitments.’
They also sent a letter to Business Secretary Kwasi Kwarteng urging him to intervene.
Responding to news of the Morrisons deal, the trustees welcomed the supermarket’s plans to continue supporting the pension schemes, adding they would ‘continue to engage’ to ensure members’ benefits were protected.