17th Aug 2015 13:48
LONDON (Alliance News) - Wm Morrison Supermarkets PLC is in advanced talks to sell its M Local convenience store chain to a group of industry executives backed by investment firm Greybull Capital, The Telegraph reported Sunday.
The newspaper said it is understood that Greybull, which saved Monarch Airlines from bankruptcy last year, will provide tens of millions of pounds to fund the takeover and provide the stores with working capital.
The Morrisons convenience estate will include between 150 and 160 stores, which generate between GBP250 million and GBP350 million in sales, The Telegraph said, citing sources and adding that the shops are thought to generate a small profit.
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11804737/Morrisons-close-to-convenience-stores-sell-off.html
Morrisons, which had been looking to try and catch up with its UK supermarket rivals in the convenience store sector, has now significantly slowed its M Local rollout and said in May it is reviewing its proposition and site selection criteria.
The grocer booked a massive GBP1.27 billion property impairment charge in its last financial year and since then has paired back its expansion plans and also has had to write down property values.
Back in March, Finance Director Trevor Strain had said that convenience stores would be a "growing channel" and that the supermarket's focus going forward would be to improve on site selection for its stores.
Chairman Andrew Higginson also said in March that in an attempt to turn the business around following the appointment of David Potts as the new chief executive, the whole business would be focused on improving the performance of its core stores, which are its larger stores.
Shore Capital analysts Clive Black and Darren Shirley said Monday that the broker is "not uncomfortable" with Morrisons exploring solutions to problem areas of its business such as convenience stories, saying that the peak in convenience stores has passed.
"Morrison's CVS business has not been a solution to a strategic problem to our minds with the probability that many stores are loss-making and lacking soothing current sales and contribution trajectories," the analysts said.
Black and Shirley added that many, if not all, of the prime supermarket convenience sites have been taken in the UK, most notably by rivals J Sainsbury PLC and Tesco PLC, leaving Morrisons with "inferior" sites, and that the re-engineering of superstores represents a new challenge for the convenience stores.
"Indeed, in terms of a convenient place to shop, it could argued that a place with a large car park, generally lower prices, much greater choice, and an attractive service provision to boot is much more convenient in many respects than what is often a highly functional, often sterile, high street supermarket CVS store," the analysts wrote.
Shares in Morrisons were trading down 1.4% at 175.33 pence Monday afternoon.
By Tom Waite; [email protected]; @thomaslwaite and Karolina Kaminska; [email protected] @KarolinaAllNews
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