Grocer Morrisons coughed up some £182m to snap up beleaguered convenience store operator McColl’s, defeating a rival bid from Asda owners the Issa brothers.
The newsagent chain’s equity value was worth around £3m earlier this month while senior creditors were owed some £160m, documents from administrators PwC revealed.
While the Issa’s EG Group had offered “materially” more cash than private equity owned Morrisons, the grocer won out after it pledged more cash for unsecured creditors. Morrisons also clinched the deal due to its position as McColl’s main supplier.
Four credible bidders had been eyeing a takeover of the debt-laden firm in its last few months before calling in administrators.
However, the number of bidders had slimmed to three by the time McColl’s shares were suspended on 6 May, narrowing further to just Morrisons and forecourt operator EG Group.
A court application process for plunging the companies into administration was placed on hold on Friday 6 May, until Monday 9 May, the documents revealed.
This was partially as the administrators could not trade the business over the weekend, ‘as they did not have funding to support trading, and practical issues such as the sales of alcohol and other licenced goods would have been prohibited.”
What’s more, PwC revealed that had the appointment concluded on the Friday, joint administrators would have completed a sale of McColl’s business and assets to EG Group.
At this stage in time, a sale to the petrol court operator – referenced by PwC in the documents as ‘Party A’ – would have “kept all stores open, preserved the roles of 16,000 employees, seen a full return to secured and preferential creditors with a likely dividend to unsecured creditors in excess of the prescribed part.”
An expected dividend to unsecured creditors in the Morrisons’ proposal was estimated to be up to 50 per cent higher than the expected outcome in the bid made by EG Group.
Both parties submitted bids including to take over the entire store estate and its employees, a transfer proposal for the pension schemes and cash consideration to acquire McColl’s that would see all secured and preferential creditors paid in full with a distribution to unsecured creditors.