4 minute read
McColl's
by 55 North
Tip of the iceberg?
The deal for McColl’s sees all 16,000 staff and 1,100 shops transfer to Morrisons.
PwC, administrator for McColl’s Retail Group, has completed a sale of the business and assets of the Group to Alliance Property Holdings. Alliance is part of the Morrisons Group, the failed convenience chain’s largest supplier. McColl’s collapse has come after a financial struggle over the past two years as it witnessed soaring costs due to supply chain disruption, inflation, and its large debt burden.
The deal for McColl’s comes less than a year after Morrisons itself was bought for £7bn by US private equity company Clayton, Dubilier & Rice. The supermarket giant has seen off competition from Asda owners the Issa brothers and TDR Capital after its initial offer was turned down by McColl’s lenders.
Prior to the deal being struck, Honor Strachan, Food & Grocery Analyst at GlobalData, warned: “During a period of intense cost pressure on UK grocers, and an unfavourable outlook for margins and profitability, an acquisition for either of the private equity-owned grocers would be a massive undertaking and a distraction from their core business – especially as raising cash to help absorb these pressures and to invest in retail prices should be the primary focus this year.”
The deal transfers all 16,000 staff, 1,100 shops across the UK and includes Morrisons agreeing to rescuethe Group’s two pension schemes, which have more than 2,000 members.
Rob Lewis, Joint Administrator and Partner at PwC, said: “Especially during the current economic climate, the completion of this transaction provides much-needed certainty to McColl’s 16,000 staff after a period of understandable concern following the Group’s challenges over the past months. As well as saving thousands of jobs, this deal secures a platform for the trustees of the Group’s pension schemes to enter into arrangements which will protect the pensions entitlements of so many people.
“Morrisons’ Wholesale Supply Agreement will continue in place after the transaction, minimising disruption to customers and employees as all stores will continue to trade. We wish Morrisons well with integrating McColls into their business.”
David Potts, Morrisons Chief Executive, said: “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.”
Retail trade union Usdaw has welcomed Morrisons’ intervention, but is now seeking assurances for the future for staff along with trade union recognition to give them a voice in the business.
Joanne McGuinness, Usdaw National Officer, said: “It is great news that Morrisons has been successful in their bid to buy McColl’s outof administration, and it will be a huge relief for the staff. We are now seeking urgent discussions with Morrisons to help secure the future for the staff.
“McColl’s was a non-unionised business, which meant their staff had no real voice in the future of the business. Usdaw has a long-standing and productive relationship with Morrisons and we will be looking to extend trade union representation to all staff in McColl’s.”
Looking forward, there are fears that this episode is the start of a new chapter for grocery retail. Mo Razzaq, Deputy Vice President of the Fed, told Channel 4 News: “The cost of electric and gas is causing huge issues. The cost of petrol and diesel is also causing a lot of issues. McColl’s are the tip of the iceberg, there’s more to come. The reason there is more to come is that not enough is being done for the retailer.”
Dr Gordon Fletcher from the University of Salford Business School agrees. He told BusinessLive: “The trajectory towards too many, too large stores and too few smaller convenience retailers is not a game that can be won on an inevitable downward spiral towards the lowest price point.”
