Wm Morrison is set to prevail in a battle to buy McColl’s with a last-minute offer for the crisis-hit convenience store chain that beat a rival bid from petrol station operator EG Group.
Morrisons’ final proposal to immediately repay McColl’s lenders and take McColl’s out of administration won after a fierce contest on Sunday night, according to people briefed on the process.
The convenience store group has debts of about £145mn and its lenders, as of last summer, included Barclays, HSBC and Bank of Ireland. Morrisons’ offer comprises only of repaying the debt.
The sale of McColl’s is likely to protect some of the 16,000 jobs that are at risk in the event of a company collapse. Morrisons has offered to take on all stores and staff, but has made no assurances as to what would happen to the McColl’s stores that have not been performing well.
The outcome will be a blow to EG, whose owners, the billionaire Issa brothers, also control grocery chain Asda. EG’s offer to buy McColl’s had been favoured on Friday night and would have prevailed had delays to the formal appointment of an administrator not given Morrisons more time this weekend to make a counter offer.
McColl’s already has close commercial ties with Morrisons, which remains a supplier and its largest unsecured creditor. Morrisons said in its most recent trading update it had an exposure to McColl’s of up to £130mn, mostly consisting of stock.
The 1,200 convenience stores operated by McColl’s include roughly 200 outlets run under the Morrisons Daily brand, a joint venture that was set to grow to 450 shops by the end of the year.
Morrisons and EG both declined to comment.
Convenience stores such as those operated by McColl’s received a trading boost in the early stages of the pandemic, when consumers preferred not to travel too far from home, but have since reverted to their traditional function of small top-up shops.
McColl’s was valued at about £200mn when it floated in 2014, but has found it hard to compete with larger companies such as Tesco, J Sainsbury and Co-op. After announcing it was on the brink of collapse on Thursday, McColl’s market value dropped as low as £3mn.
McColl’s on Friday announced its intention to appoint PwC as administrators, but that is yet to be made formal.
So-called pre-pack administrations happen when the buyer of a bankrupt company is lined up before administrators are appointed, and can be controversial. They tend to wipe out existing shareholders and also enable the new owners to pass on pension fund liabilities to the industry lifeboat, the Pension Protection Fund. Trustees of McColl’s pension scheme have written to the government, asking it to ensure its members’ benefits are protected.
Morrisons’ winning bid was first reported by Sky News.
