McColl’s: Morrisons successfully takes on convenience chain

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While the company’s operations move to the new owner, all employees will keep their jobs

Morrisons has triumphed over EG Groups in its ambition to take over McColl’s faltering convenience store business after a battle over the weekend.

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All McColl employees will retain their positions while the company’s operations are transferred to the new owner, and Morrisons will take over the company’s two pension plans.

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The convenience store business went bankrupt on Friday May 6, threatening the future of its 1,160 stores and 16,000 employees.

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McColl’s had been in talks with potential lenders to bolster the company, which has been struggling during the pandemic due to supply chain challenges, inflation and a heavy debt burden.

But talks with lenders collapsed after creditors refused to extend a deadline for the company to raise additional funds.

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In a different twist in the story, however, the convenience chain.

Here’s everything you need to know about it.

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What is McColl’s?

McColl’s Retail Group is a British chain of retail and newsagents operating under the names Morrisons Daily and McColl’s (for its grocery stores), Martin’s (for its newsagents and pound stores) and RS McColl in Scotland.

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The company operates over 1,100 convenience stores in England, Scotland and Wales.

It was founded in Glasgow in 1901 and serves around five million people a week, according to its website.

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Morrisons and McColl’s are key partners, with McColl’s operating hundreds of convenience stores under the Morrisons Daily brand.

Kevin Mountford, savings expert and co-founder of raisin United Kingdom, said: “It makes perfect sense that Morrisons would fight to save McColls. McColl’s also does business as Morrisons Daily, which is Morrison’s answer to Tesco Express, which has helped Tesco make huge profits.

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“With McColls facing administration, Morrisons was once again at risk of losing its convenience store formats, which would be of great concern to Morrisons’ new owners as Morrisons Daily compares well to McColl’s original brand.”

Why is it fighting?

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Troubled convenience store business McColl’s has confirmed it could fall under administration.

McColl’s has been “in a difficult place, particularly with Covid-19,” Teresa Wickham, a former director of Safeway, told the BBC’s Today programme.

She said the pandemic struck at a time when the company was moving from typical convenience stores to more fresh fruit through its alliance with supermarket Morrisons.

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Wickham said stores that had done so had done well because shopping habits had shifted to buying more local produce during the coronavirus crisis, but the chain lacked investment and only a small percentage of its stores made the switch.

In 2021, McColl’s was also accused by the government of failing to pay some of its employees the UK minimum wage.

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It claimed that the underpayments were due to historical errors and that staff were promptly reimbursed, but was ordered to pay the money, plus a £3.2million fine for breaches such as deducting wages for uniforms and expenses, or failing to pay of wages to repay the correct apprenticeship quota.

Has it gone broke?

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The convenience store business went bankrupt on Friday, threatening the future of its 1,160 stores and 16,000 employees.

It was expected to officially enter administration on May 9, but Morrison’s eleventh-hour bailout deal saved it.

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The decision came after a battle over the future of one of the most negatively viewed companies on the London Stock Exchange, whose shares had fallen from a price of £200m to almost nothing.

Shares were suspended on Friday May 6th.

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What happens next?

EG, whose owners also operate supermarket giant Asda, was initially tipped to confirm a McColl rescue plan.

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Early Morrisons proposals were reportedly rebuffed by lenders, who preferred EG’s offer to immediately cover more than £160m of McColl’s obligations.

However, Morrisons is expected to repay lenders in cash based on its successful move.

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Morrisons had initially planned to save only the “vast majority” of jobs and stores, but that offer was improved during the bidding process.

“All McColl colleagues will be transferred to Morrisons with the business from McColl,” the supermarket said.

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Morrisons will buy McColl’s once it enters bankruptcy proceedings overseen by professional services firm PricewaterhouseCoopers (PwC).

On Friday night, EG Group appeared to have struck a deal to buy McColl’s, although its stance on the company’s two pension plans drew political attention.

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A sale to EG was also expected to cause a short-term disruption in supply to McColl’s stores as Morrison’s wsa expected to terminate its wholesale supply partner agreement if its offer was not accepted.

Morrisons’ offer is said to include a promise to pay the lowest-paid workers £10 an hour.

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Mountford described the deal as “brilliant news for communities” that will leave jobs protected and local convenience stores open.

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