UK retailer McColl’s collapses after financing talks fail
MCCOLL’S Retail Group, a large UK convenience store chain, has collapsed into insolvency and suspended the trading of its shares after refinancing talks failed, putting as many as 16,000 jobs at risk.
The retailer, which has a network of more than 1,200 convenience stores and newsstands across Britain, confirmed in a statement that PricewaterhouseCoopers has been appointed administrator to handle the process.
McColl’s added they expect a sale of the business to third-party purchaser to take place soon.
The billionaire Issa brothers, behind the gas-station and convenience empire EG Group, have previously expressed interest in the struggling McColl’s. Any deal could potentially keep most of the stores open and trading and people employed.
McColl’s has been locked in financing talks for months with its banks and its key wholesale supplier, Wm Morrison Supermarkets, which is owned by the US private equity firm Clayton, Dubilier & Rice.
Although financing discussions with Morrison to “create a stable platform” had made significant progress, “the lenders made clear that they were not satisfied that such discussions would reach an acceptable outcome to them,” McColl’s said in a statement.
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The retailer said it had no choice but to place the company in administration, a UK form of insolvency proceedings.
Morrison has previously told its shareholders it could face a hit of up to £130 million (S$222.5 million) from the collapse of McColl’s, and it is owed £10 million under its wholesale contract.
McColl’s benefited during lockdowns when people started buying bigger baskets of food from convenience stores located closer to home.
It has suffered since as normal shopping patterns have returned. Britain’s retail industry is also fiercely competitive and McColl’s has struggled to match rivals, such as the Co-Op chain, Tesco and J Sainsbury.
The chain warned last week that shareholders could be wiped out if agreement on a financing deal couldn’t be reached.
It also said earlier this week that it would not hit a regulatory deadline to file its annual accounts. The shares have fallen 86 per cent this year.
McColl’s went public in 2014 with a value of about £200 million and employed a strategy to shift its business more toward higher-margin fresh food sales rather than tobacco and newspapers.
The collapse of McColl’s is the most notable in the UK retail sector since the failure of Arcadia Group, the fashion empire that once owned fashion brands Topshop and Dorothy Perkins, in 2020.
It is also another blow to an industry which has battled pandemic restrictions and a global supply chain crisis, and is now facing soaring inflation in Britain. BLOOMBERG
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