(Reuters) -British supermarket group Morrisons has won a battle against the owners of rival Asda to buy collapsed convenience store chain McColl’s.
In a deal structured through a so called pre-pack administration, Morrisons, which has a wholesale supply deal with McColl’s, will take on all its 1,160 stores, including 270 Morrisons Daily format stores.
Morrisons will also take on all of McColl’s workforce of 16,000 and its two pension schemes, which have over 2,000 members.
It said McColl’s’ secured lenders and preferential creditors would be paid in full with a distribution also expected to unsecured creditors.
McColl’s went into administration with debt of just under 170 million pounds ($210 million).
EG Group, the petrol station and food retail business owned by brothers Zuber and Mohsin Issa and private equity group TDR Capital, was set to seize control of McColls after its lenders rejected a rescue deal from Morrisons on Friday. The brothers and TDR also own Asda.
However, over the weekend, Morrisons came back with a fresh proposal.
“Although we are disappointed that the business was put into administration, we believe this is a good outcome for McColl’s and all its stakeholders,” said Morrisons CEO David Potts.
“This transaction offers stability and continuity for the McColl’s business and, in particular, a better outcome for its colleagues and pensioners.”
Morrisons, which trails market leader Tesco, Sainsbury’s and Asda, has been owned since October by U.S. private equity group Clayton, Dubilier & Rice (CD&R).
McColl’s had been in talks with its lenders for weeks to try to resolve its funding woes. Its shareholders had seen the value of their investment virtually wiped out over the last year.
The retailer’s stock was suspended from trading on Friday.
The sale to Morrisons was conducted by administrator PriceWaterhouseCoopers.
($1 = 0.8103 pounds)
(Reporting by James Davey in London and Muhammed Husain in Bengaluru; Editing by Krishna Chandra Eluri and Bernadette Baum)