McColl’s sinks into administration after Morrisons deal snubbed
2022.05.06 19:20
2/2
People enter a McColl’s convenience store in London, Britain, May 6, 2022. REUTERS/Toby Melville
2/2
By James Davey and Pushkala Aripaka
(Reuters) -Struggling British convenience store chain McColl’s collapsed into administration on Friday, putting 16,000 jobs at risk after its lenders rejected a rescue deal from supermarket group and wholesale partner Morrisons.
McColl’s runs 1,100 stores, including convenience outlets under its own name and Morrisons Daily, as well as Martin’s newsagents. Around 6,000 of its staff are full-time.
The company said while talks with Morrisons had progressed, “the lenders made clear that they were not satisfied that such discussions would reach an outcome acceptable to them.”
McColl’s board said it had no choice other than to place the company in administration, a form of protection from creditors, appointing PriceWaterhouseCoopers (PWC) as administrators.
Morrisons said its proposal would have preserved the vast majority of jobs and stores, as well as protecting pensioners and lenders.
“For thousands of hardworking people and pensioners, this is a very disappointing, damaging and unnecessary outcome,” said a Morrisons spokesperson.
McColl’s, which has just under 170 million pounds ($210 million) of debt, said it expected PWC to sell the business as soon as possible.
Sky News reported EG Group, the petrol station and food retail business owned by brothers Zuber and Mohsin Issa and private equity group TDR Capital, was expected to agree a deal that would rescue the bulk of the company.
EG Group had no immediate comment.
The Issa brothers and TDR also own Morrisons’ rival Asda.
McColl’s requested the London listing of its shares be suspended with immediate effect. Shareholders had already seen the value of their investment virtually wiped out over the last year.
McColl’s, which has suffered from availability issues and patchy trading, had been in talks with lenders for weeks to try to resolve funding issues.
Morrisons, which trails market leader Tesco (OTC:TSCDY), Sainsbury’s and Asda, has been owned since October by U.S. private equity group Clayton, Dubilier & Rice (CD&R).
Morrisons’ deal with McColl’s has seen over 200 stores converted to Morrison’s Daily with a target of 450 by November 2022. Morrisons’ 2021 annual report put its potential exposure to its McColl’s contract at 65-130 million pounds.
McColl’s will file documents to the court on Friday to appoint PWC as administrators.
Smiths Group (OTC:SMGZY), which supplies McColl’s with newspapers and magazines, said the retailer represented a bad debt risk to it of 6-7 million pounds, with 1.2 million pounds being overdue.
($1 = 0.8115 pounds)
