Morrisons set to win battle for McColl’s after winning fight with EG Group
Morrisons is understood to be set to seize control of McColl’s after a last-ditch bid battle for the failed convenience store chain with EG Group, the petrol station operator.
The supermarket chain has offered to keep the retailer’s 1,100 stores and 16,000 staff and made a commitment to honour its pension obligations as part of the deal.
The sale will be structured as a pre-pack administration, handled by PwC.
Pre-packs are a fast-track insolvency process where a buyer is lined up beforehand and the business sold soon after the appointment of administrators.
PwC is yet to be formally appointed but the deal is expected to be announced today.
It marks the latest twist in the collapse of McColl’s and the race to find a buyer.
An acquisition by Morrisons would likely be less disruptive to McColl’s as it has a wholesale agreement with the chain as part of a contract dating back to 2017.
McColl’s also trades as Morrisons Daily, a joint venture which has 250 shops, Martin’s and RS McColl.
Morrisons, which is owned by Clayton Dubilier & Rice and is Britain’s fourth-biggest grocer, is understood to have also agreed to repay the McColl’s lenders in cash, rather than roll over the debt onto the grocer’s balance sheet as originally planned. It is also thought to have agreed not make a claim as an unsecured creditor, which will mean a better outcome for other creditors, according to a source.
HSBC, Barclays and Natwest, the lenders, triggered the collapse of McColl’s last week by refusing to agree to a waiver or a refinancing of the business.
Morrisons had earlier tried to win control of McColl’s with an initial proposal which would have kept the business out of administration and transferred pension liabilities to the supermarket.
That was rejected by the convenience chain’s banks, who favoured EG’s instant repayment of the £165 million that they are owed by McColl’s.
EG had emerged as frontrunner late last week, but its pursuit risked political controversy over its treatment of McColl’s pension scheme which would have fallen into the hands of the Pension Protection Fund, the industry-funded lifeboat for failed schemes.
EG had made an unexpected about-turn late yesterday and said that it would take responsibility for the pension scheme, meaning that McColl’s 2,000 members would avoided a cut of up to 20 per cent to their promised pensions over their lifetimes.
EG is owned by the Issa brothers, the Blackburn-based businessmen and TDR Capital, the private equity firm, which also owns Asda, Leon and Cooplands, a bakery chain.
The trustees of the McColl’s pension fund had written to EG at the weekend, highlighting that the company’s website claimed it “strives to be a good corporate citizen”.
“We trust that this means you will act in good faith towards the schemes and their 2,000 members,” they wrote.
The trustees also raised concerns with Kwasi Kwarteng, the business secretary, that a pre-pack administration would allow the new owners to jettison pension liabilities.
The financial woes of McColl’s largely stem from the demise of Palmer & Harvey, a wholesaler, in 2017 which badly dented its profits and sales and caused supply chain problems, leaving it hugely reliant on Morrisons.
Its shares were suspended at 1.66p on the London Stock Exchange on Friday. Their value had fallen by more than 95 per cent this year.