UK retailer Morrisons has agreed to sell 140 M local convenience stores for ￡25 million ($54.2 million) to a team led by retail entrepreneur Mike Greene and backed by Greybull Capital.
Morrisons will retain five M local stores, which are on forecourts or will be converted to small Morrisons supermarkets.
A Morrisons review of the M local business, announced in March this year, concluded that M local would have required significant further investment in new sites, plus additional capital expenditure and lease commitments, to reach profitability.
The Morrisons board has stated that the sale represents the best solution for Morrisons and will enable its future investment to be focused on core supermarkets.
Morrisons expects to incur a loss on disposal of around ￡30 million ($65.1 million). In addition, Morrisons retains a guarantee on individual lease obligations, which could revert to Morrisons if the new business does not succeed. The residual contingent liability in this event is estimated at up to ￡20 million ($43.4 million).
In 2014/15, the M local stores to be sold recorded an operating loss of ￡36 million ($78.1 million) and gross assets were ￡68 million ($147.5 million). For 2015/16, the stores’ budgeted operating loss was ￡23 million ($49.9 million).
“Convenience is a large and growing channel in UK food retailing,” Morrisons CEO David Potts said. “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.”