Morrisons has triumphed in the battle to buy the failed retailer McColl’s after striking a deal with creditors to settle debts including a £10m tax bill.
Some 16,000 jobs across 1,100 stores have been saved following the rescue takeover by Britain’s fourth-biggest supermarket, which beat the billionaire brothers behind Asda in a bidding war.
City sources said that Morrisons’ final offer for McColl’s meant that lenders would be paid out in full, as well as preferential creditors such HM Revenue & Customs. It is understood that McColl’s owed around £10m in unpaid VAT.
McColl’s pension scheme, which has more than 2,000 members, welcomed the takeover after Morrisons promised to honor retirement fund obligations.
The company called in administrators last week following the collapse of initial talks with Morrisons about a solvent takeover. This plan was rejected by the lenders owed £165m as they would need to wait until 2025 before being repaid.
Morrisons was then targeted by EG Group, the petrol station empire controlled by the billionaire Issa brothers, who also owns Asda. They promised to repay lenders in full and offer younger staff large wage increases.
However, Morrisons returned and ultimately triumphed by offering a better deal to creditors.
David Potts, chief executive of Morrisons, said: “We believe this is a good outcome for McColl’s and all its stakeholders. This transaction offers stability and continuity for 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.”
A spokesman for the pension scheme said: “The trustees welcome the announcement that Morrisons will continue to support the schemes following its acquisition of the McColl’s business. The trustees will continue to engage with all stakeholders to ensure that members’ benefits are protected following the completion of the transaction.”
Rob Lewis, joint administrator at PwC which oversaw the sale, 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 . All in all, a really positive outcome.”
The McColl’s board is understood to have failed to submit the EG Group takeover for approval by judges before the courts closed on Friday.
Court approval was required because EG Group planned to acquire the company through a “pre-pack” sale – a type of insolvency that allows a business to be sold immediately after administrators are appointed.
The failure to file documents on time appears to have played a pivotal role in re-opening the door for Morrisons.
Morrisons submitted a counterbid on Saturday lunchtime. Both parties were then given a 6pm deadline on Sunday to make ‘best and final’ offers.
EG Group’s bid is understood to have originally included transferring McColl’s retirement fund, which has 2,000 members, into lifeboat the Pension Protection Scheme.
However, EG Group said on Monday that its final bid “had proposed to maintain the link between McColl’s pensions schemes and the business”.
The change followed an appeal by pension trustees to Kwasi Kwartangthe Business Secretary, and Thérèse Coffey, the Work and Pensions Secretary, to step amid concerns that scheme members would be hit by cuts to payouts of up to 10pc.
A spokesman for EG Group said: “Our proposal would have safeguarded the UK jobs of 16,000 McColl’s colleagues, increased the pay of all hourly-paid colleagues aged 18 and over to £10.05, maintained all the currently trading stores, and ensured continued provision of valuable community services, such as Post Office counters.
“Moreover, EG Group had proposed to maintain the link between McColl’s pensions schemes and the business, respecting historical promises made to the members of the schemes.”