Petrol station operator EG Group is attempting to buy convenience store chain McColl’s business out of administration, after the crisis-hit retailer rejected a rescue bid from Wm Morrison.
Blackburn-based EG, whose owners also control Asda, has been pressing for a swift deal, one person with knowledge of the matter said, as it seizes on the retailer’s collapse to expand its UK grocery store network.
McColl’s operates more than 1,200 convenience stores, including some under the Morrisons Daily brand. It said on Friday that it had appointed PwC as administrator after it rejected a proposal by Morrisons.
A sale would help save some of the 16,000 jobs that would be at risk if the company collapsed. The convenience store group has debts of about £145mn.
McColl’s said in a statement on Friday afternoon that the Morrisons offer had not been accepted by lenders, who were “not satisfied that such discussions would reach an outcome acceptable to them”.
“The board was regrettably therefore left with no choice other than to place the company in administration,” McColl’s added. It has requested that its shares be suspended with immediate effect.
Morrisons said: “We put forward a proposal that would have avoided today’s announcement that McColl’s is being put into administration, kept the vast majority of jobs and stores safe, as well as fully protecting pensioners and lenders.
“For thousands of hardworking people and pensioners, this is a very disappointing, damaging and unnecessary outcome.”
Any deal with EG would be agreed and financed by the petrol station group rather than Asda, and the convenience stores would be unlikely to operate under the Asda On The Move brand, the person said.
EG is still in talks about how it will approach McColl’s pension fund, whose trustee on Friday called for commitments to respect existing pension promises.
Convenience stores such as those operated by McColl’s enjoyed strong trading in the early stages of the pandemic, when consumers preferred not to travel too far from home, but have since reverted to their traditional function of small top-up shops.
McColl’s was valued at about £200mn when it floated in 2014, but has since found it hard to compete with larger players such as Tesco, J Sainsbury and Co-op. After announcing that it was on the brink of collapse on Thursday, McColl’s market value dropped as low as £3mn.
The company’s lenders, as of last summer, included Barclays, HSBC and Bank of Ireland.
The pension trustees warned that potential bidders could try to use a controversial insolvency procedure to break promises made to 2,000 retirement plan members.
On Friday the trustees said “breaking the link” between two pension schemes sponsored by McColl’s, by way of a “pre-pack” administration, would represent a “serious breach” of the pension promises made to staff who had served the business loyally over many years.
“Pre-pack” arrangements can be controversial as they enable pension fund liabilities to be passed to the Pension Protection Fund, the industry lifeboat, where members typically face cuts to their pensions, but the business continues under the new owners.