Morrisons strikes eleventh-hour deal to save McColl’s from collapse

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Supermarket giant Morrisons has swooped in to save embattled convenience retailer McColl’s with an eleventh-hour rescue deal that will preserve the majority of stores and jobs.

McColl's Shropshire

McColl’s has recently warned on profits and could have its listed shares suspended

Retail Week understands the deal has been all but agreed with Morrisons taking £170m of debt and the McColl’s pension plan on to its books, thereby staving off the looming prospect of the convenience retailer crashing into administration.

The big-four grocer will aim to keep as many of McColl’s 1,100 stores open as possible. McColl’s employs 16,000 people across the UK.

Morrisons declined to comment on the rescue deal.

The approach was made by Morrisons to PricewaterhouseCoopers (PwC), the adviser to McColl’s banks according to Sky News.

While the deal has yet to be confirmed by McColl’s or Morrisons, the news will come as relief to the convenience retailer’s stakeholders after a torrid 24 hours.

Retail Week first revealed on Thursday that the business had been forced to pause the rollout of its Morrisons Daily format store conversions in a bid to conserve cash.

On Friday morning, McColl’s said an administration was “increasingly likely” if a prospective buyer could not be found to solve its deteriorating financial situation.

McColl’s warned on profits two weeks ago, blaming “softer” Easter trading exacerbated by supply chain issues, and parted company with its long-time chief executive Jonathan Miller in late March. Miller was replaced on an interim basis by chief operating officer Karen Bird.

The retailer has a longstanding relationship with Morrisons and has converted more than 200 of its stores to the Morrisons Daily fascia since an initial trial in 2019.

The c-store chain said the Morrisons Daily shops trade 20% better on like-for-like sales than McColl’s stores. In November, it struck a deal with the grocer to extend the planned conversions from 350 to 450 stores by the end of 2022.

Earlier this week, McColl’s warned the City it would not be able to meet its end of May deadline for filing its annual accounts, which raised the prospect of its publicly listed shares being suspended.

McColl’s share price closed at 1.09p yesterday, valuing the business at just £3m. It was worth more than 30-times that last July.