McColl’s: what next as Morrisons wins battle for ownership?

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The supermarket giant has reportedly won the battle to take over the faltering retail company

After a weekend battle between Morrisons and EG Groups, the supermarket giant has won its bid to take over ailing convenience chain McColl’s.

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McColl’s initially confirmed it had gone bust and would appoint administrators, putting 1,100 stores and 16,000 jobs at risk.

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Corresponding Sky newsMorrison’s offer stipulates that all McColl branches and employees will be retained.

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Sky reported first on Thursday, May 5, that the company could bring in administrators as early as the next day.

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.

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

However, in another twist of the story, the convenience chain seems likely to be saved.

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Here’s everything you need to know about it.

What is McColl’s?

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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.

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

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

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

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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.

“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.”

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Why is it fighting?

Troubled convenience store company 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.

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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.

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.

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

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.

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Has it gone broke?

McColl’s said if talks with potential lenders were unsuccessful, the group would be “increasingly likely” to be forced into administration.

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It then confirmed that it had gone bust.

It was expected to officially enter administration today (9 May) but Morrison’s eleventh-hour bailout contract 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 £200m to almost nothing.

Shares were suspended on Friday May 6th.

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What happens next?

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

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PwC is expected to make an official announcement later Monday (May 9).

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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McColl’s lenders – including Barclays, HSBC and the state-backed NatWest Group – initially rejected Morrisons’ sustained bailout offer because they wanted to repay their loans immediately.

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.

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

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

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