Morrisons Beats Asda To Rescue Convenience Store Chain McColl’s
U.K. grocery giant Morrisons has won the battle for control of bankruptcy-threatened McColl’s Retail Group, one of Britain’s biggest convenience store chains, defeating rival Asda.
Yesterday evening’s move prevents Morrisons from losing its foothold in the hugely lucrative convenience store market – currently dominated by Tesco, Sainsbury’s and Co-op – and leaves the formerly Walmart-owned Asda lagging far behind.
It would also consolidate a major new c-store player at a time when Amazon
On top of that, the deal comes less than a year after Morrisons itself was bought for $8.7 billion by U.S. private equity company Clayton, Dubilier & Rice (CD&R).
The supermarket giant saw off late competition from EG Group, the gas station operator, with an offer that will see all of McColl’s stores and its 16,000-strong workforce safeguarded.
The deal will be structured as a pre-pack administration, meaning Morrisons is buying McColl’s immediately after it entered insolvency proceedings, overseen by administrator PricewaterhouseCoopers (PwC).
While in making its initial bid earlier last week, Morrisons made clear that it saw no reason for the convenience store company to declare itself insolvent, with McColl’s on the brink of collapse, PwC is understood to have believed there was not enough time to finalize a solvent transaction.
Morrisons To Keep McColl’s Staff And Stores
Morrisons’ commitments to the future of McColl’s include retaining all 1,100 stores and its full workforce, as well as honouring all of its outstanding pension obligations, which would see creditors repaid immediately in full, meeting their principal demand.
Morrisons’ status as a major creditor of McColl’s is also understood to have been influential in the final decision.
The outcome follows a fierce battle over the future of a company which has seen its shares in freefall, having plummeted from a valuation of $247 million to become almost worthless.
The deal also represents a sudden change of direction. Last Friday evening, EG Group appeared to have taken pole position for a takeover of McColl’s, although its position regarding the company’s two pension schemes had begun to attract political scrutiny.
Meanwhile, McColl’s lenders rejected a solvent rescue offer from Morrisons on Friday that would have involved them rolling over more than $124 million of debt into the supermarket chain, with the backstop of being repaid in full as the loans expired. The lenders, which include banks Barclays, HSBC
Morrisons And McColl’s Partnership
“All McColl’s colleagues will be transferred with the McColl’s business to Morrisons,” the supermarket said in a statement on Monday.
Morrisons chief executive David Potts said: “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.
“We all look forward to welcoming many new colleagues into the Morrisons business and to building on the proven strength of the Morrisons Daily format.”
McColl’s Retail Group has been an important partner for Morrisons, operating 270 smaller shops under the Morrisons Daily brand, plus McColl’s (convenience stores), Martin’s (newsagents and ‘pound shops’) and RS McColl in Scotland.
The pandemic struck at a time when the company was transitioning from a typical convenience offer, providing more fresh fruit through its alliance with Morrisons, while it raised $37 million from shareholders in a cash call just eight months ago.
Its administration makes it the largest insolvency in the U.K. retail sector by size of workforce since Edinburgh Woollen Mill Group in 2020. Since then, both Debenhams, which employed about 12,000 people, and Sir Philip Green’s Arcadia Group, which had a workforce of roughly 13,000, have also disappeared.