Morrisons is poised to beat the owners of Asda in the race to buy McColl’s, the struggling convenience store chain that is expected to be put into administration as soon as Monday morning.
The bid from Morrisons is expected to be announced as the preferred bidder for McColl’s, despite an improved offer from EG Group, the petrol forecourts operator owned by the Blackburn-based Issa Brothers, as first reported by Sky News.
McColl’s is to be sold via a pre-pack administration, after the Scotland-based retailer’s lenders declined a request to restructure its debt. That sparked a bid battle for the London-listed company, which employs 16,000 people across 1,100 shops in the UK.
Morrisons, Britain’s fourth biggest grocer, already has a supply agreement with McColl’s, to which it provides a range of products under the Safeway brand. Morrisons was bought out by the US private equity group Clayton, Dubilier & Rice last year.
The professional services firm PwC is overseeing the administration process on behalf of McColl’s lenders, who were thought to be focused on recouping their loans in full.
The Guardian understands that EG Group has been informed that it has not been successful.
It is understood that Morrisons agreed as part of its offer to waive the money it was owed by McColl’s, therefore allowing the administrators to distribute more money to other unsecured creditors.
Morrisons could have been owed as much as £150m by McColl’s through its supply agreement, it is understood.
The supermarket warned at the end of January, when it updated the market on its results for the Christmas trading period, of the “deteriorating financial position” of McColl’s. It said this “could impact the recoverability of ongoing accounts receivable balances”.
At the time, Morrisons estimated that its potential exposure to the collapse of McColl’s could be as high as £130m. The amount is understood to have increased since January.
Initially, EG Group’s offer for McColl’s had found favour after it said it would repay the convenience chain’s lenders in full, but Morrisons reportedly matched that by saying it would also repay the loans in cash.