Morrisons rescue deal for McColl’s cost £182m

The supermarket giant beat rival bidders EG Group to a deal by pledging more cash for unsecured creditors and leveraging its position as a supplier to the c-store operator.

McColl’s had a market cap of just £3m when its shares were suspended earlier this month, but regulatory documents produced by administrators PwC and first reported by the Financial Times revealed that senior creditors were owed £160m.

EG, the petrol forecourt powerhouse operated by Asda owners the Issa brothers, offered “materially” more cash than Morrisons in the two-way battle to save the business.

But Morrisons’ proposal did not make any claims against its own unsecured debts of around £130m. That meant the offers to other unsecured creditors were “up to 50% higher” than under EG’s terms.

PwC’s documents revealed that four credible bidders entered the race to save McColl’s. That leading group became three by the time McColl’s shares were suspended on May 6. 

Other financial bidders including hedge funds were effectively frozen out of the process after Morrisons refused to restructure its own creditor claims in the eventuality of a third party taking ownership of McColl’s. 

The offers submitted by both Morrisons and EG took on McColl’s entire 1,200 store estate, its 16,000 staff, two pension schemes, administration costs and the repayment of secured lenders of preferential creditors including HMRC.   

After completing the deal last week, Morrisons boss David Potts said: “Although we are disappointed that the business was put into administration, we believe this is a good outcome for McColl’s and all its stakeholders. 

“This transaction offers stability and continuity for the McColl’s business and, in particular, a better outcome for its colleagues and pensioners. 

“We all look forward to welcoming many new colleagues into the Morrisons business and to building on the proven strength of the Morrisons Daily format.”

• Don’t miss the best of the week – sign up to receive the Editor’s Choice every Friday