Supermarket Morrisons is reportedly in talks about selling most or all of its 160 M Local convenience stores.
The Bradford-based retailer is said to be close to a deal with a team of private equity investors led by Greybull Capital, which last year saved Monarch Airlines with an injection of £125 million in funding.
The move, while not a complete surprise, goes further than expected. Earlier this year, Morrisons announced plans to close 23 M Local stores and 10 of its smaller supermarkets after a year in which profits (excluding the property hit) fell 52% to £345 million. However, since then, chairman Andy Higginson has said that 'upwards of 30%' of the M local stores haven't been working as they should.
Soon after, ex-Tesco director David Potts took the helm as CEO, replacing Dalton Philips - who had overseen a halving of pre-tax profits and a fall in sales during his five-year tenure.
Potts has pledged to focus on price cuts rather than expansion. Once the business is in better shape, the company is expected to make a new start in the convenience business, possibly in the form of a joint venture or acquisition.
For now, though, most if not all of the remaining M Local stores are set to go. The stores are believed to generate between £250 million and £350 million in sales each year, but only a small profit.
The Greybull deal is believed to involve paying tens of millions of pounds to acquire the properties, as well as an offer of working capital to the stores.
If it all falls through, other investors are believed to be interested: one is Alteri, a Mayfair-based investment firm backed by US private equity giant Apollo.
The move follows similar action from Tesco, which at the beginning of this year announced plans to close 43 stores, mostly Tesco Metro and Tesco Express outlets. The moves led to a 13% rise in the company's shares.
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