EG Group has confirmed it lost out to Morrisons in the race to buy the troubled convenience store chain McColl’s Retail Group which was placed in administration last Friday (May 6).
The supermarket chain – itself currently the subject of a CMA investigation following its acquisition by MFG owners Clayton Dubilier & Rice – won the bidding which took place over the weekend, following a deadline for offers set for Sunday at 6pm.
Over the weekend national press reports suggested that co-founders and CEOs of EG Group, Mohsin and Zuber Issa, had emerged as frontrunners to take over the chain. But today it was confirmed that Morrisons had triumphed after a “last-gasp” offer.
Administrator PriceWaterhouseCoopers LLP issued a statement: ”On appointment, the joint administrators completed a sale of the business and assets of the Group to Alliance Property Holdings Limited, part of the Morrisons Group, the Group’s largest supplier. The deal successfully transfers all 16,000 staff, 1,100 shops across the UK and also includes Morrisons agreeing to rescue the Group’s two pension schemes which have more than 2,000 members.”
McColl’s Retail Group plc, together with its subsidiary entities, operates a chain of more than 1,100 convenience retail stores and newsagents across the UK with its head office in Brentwood, Essex.
The majority of Group stores trade under the McColl’s brand, alongside 270 operating as Morrisons Daily concessions under an agreement with Wm Morrison Supermarkets Limited. The Group had faced financial pressure over recent years resulting from Covid-19 related disruption and, most recently, supply chain challenges, creating issues in product availability.
PwC said mixed trading impacted the Group in March and April 2022. While a recovery in trading performance had continued during the first half of March, the business experienced softer trading through the Easter period, impacted by reduced consumer spending and continued supply chain disruption across the industry.
”Throughout the period the Group continued discussions with its key stakeholders, with a view to agreeing a new funding deal for the business to continue as a going concern. However these discussions did not result in an option which could be delivered in the time available, nor one that would have generated the best outcome for the creditors as a whole.”
An EG Group spokesperson said: “EG Group notes today’s announcement by PwC in relation to McColl’s Retail Group (“McColl’s”) following a pre-pack administration process.
“EG confirms that it was interested in rescuing the McColl’s business. Our proposal would have safeguarded the UK jobs of 16,000 McColl’s colleagues, increased the pay of all hourly-paid colleagues aged 18 and over to £10.05, maintained all the currently trading stores, and ensured continued provision of invaluable community services, such as Post Office counters. Moreover, EG Group had proposed to maintain the link between McColl’s pensions schemes and the business, respecting historical promises made to the members of the schemes.
“EG also hopes the announcement will bring to an end the uncertainty for the hard-working colleagues at McColl’s and wishes them the best for the future.”
Last Friday McColl’s had announced it had no choice, in order to protect creditors, preserve the future of the business and to protect the interests of its 16,000 employees, to place the company in administration, appointing PriceWaterhouseCoopers LLP as administrators, “in the expectation that they intend to implement a sale of the business to a third-party purchase as soon as possible”.
McColl’s is known as a leading neighbourhood retailer, with an estate of over 1,100 managed convenience stores and newsagents. It operates McColl’s and Morrisons Daily-branded convenience stores as well as newsagents branded Martin’s across the UK, except in Scotland where it operates under its heritage brand, RS McColl.
A Morrisons bail-out would make sense in respect of an established relationship with McColls. Earlier this year, as part of a statement responding to media speculation over its financial situation, McColl’s revealed that Morrisons Daily stores were delivering like-for-like sales growth that were at least 20% better than non-converted, comparable stores, and ahead of the total convenience market. The Morrisons Daily store conversion programme re-commenced in early February 2022, following a scheduled pause over the Christmas and New Year period. It said the group remained “on track to complete 450 Morrisons Daily store conversions by the end of 2022, fundamentally reshaping the business into a more profitable and sustainable model in the medium term”.