Morrisons gets green light to bag convenience store chain McColl’s

Morrisons has received the green light from the competition watchdog to buy McColl’s.

The Bradford-based supermarket offered to sell 28 of McColl’s 1,100 convenience stores around the country and, as a result, the Competition and Markets Authority (CMA) said the deal can go ahead.

Morrisons agreed a £190million rescue deal when McColl’s went bust with a £97million debt pile in May.

Rescue: Morrisons agreed a £190m deal when convenience store chain McColl’s went bust with a £97m debt pile in May

But the CMA said the take-over risked reducing competition and pushing up prices for shoppers. 

It identified 35 areas where the deal could reduce competition between the convenience store chain and Motor Fuel Group (MFG), which, like the supermarket, is owned by US private equity business Clayton Dubilier & Rice (CD&R).

The CMA told Morrisons to submit proposals to avoid an in-depth probe of the deal, saying the rising cost-of-living crisis heightened the importance of ‘proper competition’ in the grocery market.

Sorcha O’Carroll, senior merger director at the CMA, said yesterday the proposed sales will ‘preserve competition’ and ‘prevent customers from losing out’. 

She said: ‘If, after reviewing the responses to our consultation, we conclude that the competition issues have been addressed, the deal will be cleared.’

It will be a boost for beleaguered Morrisons, which has struggled since falling into private equity ownership.

It was taken off the stock market last year by CD&R for £7billion and has been beset by problems ever since.

The supermarket has been haemorrhaging shoppers to German discounters Aldi and Lidl, resulting in it losing its spot among the so-called Big Four British supermarkets.

It has also been loaded up with debt by CD&R and is facing a surge in borrowing costs as interest rates rise. 

Credit rating agency Moody’s warned this month that Morrisons faces an additional £95million in costs to service its £6.6billion debt pile. 

At the same time, Morrisons has suffered an exodus of top talent, including the departure this month of chief operating officer Trevor Strain after 13 years at the company.

The business will hope picking up McColl’s will help to turn around its fortunes.

It will be a significant boost to the rollout of its Morrisons Daily convenience format, which has around 500 stores around the country.

Shore Capital retail analyst Clive Black said the approval would be ‘welcome news’ for Morrisons. He said it was a ‘challenging time’ for the industry and the group.

He said: ‘The business has to navigate what could be a challenging three to six months for the trade as inflation and borrowing rates bite.’

This post first appeared on Dailymail.co.uk