Wm Morrison paid the equivalent of £182mn to take over McColl’s, edging out a rival proposal from EG Group by promising more cash for unsecured creditors and leveraging its position as the convenience store chain’s main supplier.
The failed company had an equity value of roughly £3mn by the time its shares were suspended on May 6, but senior creditors were owed £160mn, according to regulatory documents produced by administrators PwC.
In a detailed account of the chain’s final months, PwC said that four credible bidders had emerged for McColl’s but that had narrowed to three by the time shares in the group were suspended.
Talks over the following weekend involved just Morrisons and EG Group, the petrol station chain owned by TDR Capital and the billionaire Issa brothers — who also own rival supermarket group Asda.
Financial bidders such as hedge funds were effectively shut out of the process by Morrisons’ unwillingness to restructure its own creditor claims if a third party took ownership of McColl’s.
“Any buyer would need to have the capacity to supply the entire store estate, possibly in a short space of time,” the PwC document noted. “All parties realistically capable of doing this had already been approached.”
Both EG and Morrisons submitted offers that provided for the retention of the entire estate of almost 1,200 stores and 16,000 staff, the rescue of McColl’s defined-benefit pension schemes, the costs of the administration and full repayment of secured bank lenders and preferential creditors such as HMRC.
EG offered “materially” more cash than Morrisons, but the latter’s proposal not to make any claim against its own unsecured debts of roughly £130mn meant that distributions to other unsecured creditors were “estimated to be up to 50 per cent higher” than under the EG offer.
Morrisons declined to comment on the contents of the documents.
