Morrisons has revealed that it has agreed to sell 140 of its M Local convenince stores for £25m.
The deal with Greybull Capital, the investment firm that last year rescued Monarch Airlines, is being fronted by retail veteran Mike Greene.
Morrisons has said that it will keep five M Local stores and convert them to smaller Morrisons supermarkets. However, the grocer will incur a £30m loss from the sale of its convenience stores. It also is keeping a guarantee on individual leases which means that stores could revert to Morrisons’ ownership if Greybull and Mr Greene do not succeed with the business.
The deal will see Morrisons M Local stores rebranded as My Local, as previously disclosed by the Telegraph.
Mr Greene and Greybull have committed to making no redundancies from Morrisons’ 2,300 convenience workforce and said that up to 200 new jobs could be created as it plans to re-open 10 M Local stores that are currently closed.
Mr Greene said: “We are committed to the people who already work in the stores and we want to grow the business with them. We believe that their potential, combined with the expertise of our leadership team, will give us a distinct advantage in the sector.”
“Convenience is a large and growing channel in UK food retailing”, said David Potts, chief executive. “Morrisons learnt much from its entry into the market, but M local was unable to scale. However, we remain open to other opportunities in convenience in the future. I would like to thank all the Morrisons colleagues for their hard work and dedication to M local.”
The ten stores that are re-opening are in Teddington, Shirley, Sutton Coldfield, Walton-on-Thames, Rayleigh, Paignton, Ramsgate, Camberley, Edinburgh and Littlehampton.
“We are delighted to acquire Morrisons’ convenience store estate and we have every confidence that it will thrive under the leadership of Mike Greene and his highly experienced team”, said Greybull partner Nathaniel Meyohas. “We are grateful for Morrisons’ support in completing this transaction to the benefit of all parties.”
The sale of the convenience stores comes despite the sector being the fastest growing part of the grocery market and valued at £37.7bn,according to fresh industry figures.
The deal comes a day before Mr Potts is expected to report in his first interim results at the grocer that pre-tax profits have dropped to around £140.7m, from £239m last year.
Revenues are also due to come in at around £8.1bn, a slight slip on the £8.5bn recorded last year. Analysts at Barclays expect the Bradford-based supermarket chain to post a 2.5pc fall in half-year like-for-like sales.
The grocer’s weakened share price has led it to be seen as a takeover target for the South African billionaire Christo Wiese, who told The Daily Telegraph last that he wasn’t ruling out adding an acquisition in the UK food sector after his recent takeovers of New Look and Virgin Active.