The final offer from Morrisons for McColls was accepted ahead of an improved bid by EG Group made over the weekend. The EG Group is a petrol forecourts operator owned by the Issa brothers, who also own Asda.
McColls has a staff of over 16,00 people, who will all be transferred to Morrisons, while all the 1,160 UK stores of the Scotland-based retailer will continue trading. The company has also agreed to take over the two pension schemes by McColls, of which there are almost 2,000 members.
The bidding for the London listed company was triggered after the retailer’s lenders, including Barclays, HSBC and NatWest banks, declined a request to restructure its debt. McColls was eventually sold via a pre-pack administration.
Morrisons is Britain’s fourth largest grocery retailer, and had an existing supply agreement with McColls, under which it provided a range of products under the Safeway brand. US private equity group Clayton, Dubilier and Rice, are the current owners of the UK-based company, after winning a takeover bid for the chain last year.
Professional services firm PriceWaterhouseCoopers was appointed as administrator to McColls, and proceeded to sell the company’s business and assets to Alliance Property Holdings – a part of the Morrisons Group.
The board of McColls initiated the administration process last Friday, after the lenders to the group withdrew their support for the business. After the sale of McColls, the lenders will now be repaid in full.
Previously, the company had offered to take over McColls, assuming its debts and responsibility for the pension scheme.
Takeover by Morrisons provides certainty to McColls staff
Morrisons Chief Executive Officer, David Potts mentioned that he had hoped to buy the business before it was put under administration. He also added that although the company was disappointed that the business was put under administration, he believed that it was a good outcome for all the stakeholders of McColls. He further said that the transaction would offer stability and continuity for the business, as well as a better outcome for its pensioners.
The larger majority of McColl’s stores trade under its brand name, although almost 270 of the shops currently operate as Morrisons Daily outlets.
The company 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.
A factor that swung the winning offer was the company agreeing to waive the money it was owed by McColls, estimated to be GBP150 million, which allowed the administrators the power to distribute more money to other unsecured creditors.
Initially, when the bidding had started, it had looked as though EG Group, owned by 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, and successfully, matched by Morrisons.
Toby Banfield, Rachael Wilkinson and Rob Lewis of PriceWaterhouseCoopers were appointed as joint administrators of McColl’s on Monday. Lewis said the sale to Morrisons provided much-needed certainty to McColl’s staff after a period of concern following the group’s challenges over the past months.
Lewis also said that as well as saving thousands of jobs, the deal secures a platform for the trustees of the group’s pension schemes to enter into arrangements which will protect the pensions entitlements of 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 poor sales and gaps on the shelves.