Morrisons sells forecourts in £2.5bn deal to pay down debt pile

Morrisons has agreed a £2.5bn deal to sell its hundreds of forecourts to petrol station giant Motor Fuel Group (MFG), in a move by its American owners to dramatically reduce the supermarket’s debt and give it a warchest to become more competitive on price.

MFG and Morrisons, which are both owned by the US private equity group Clayton, Dubilier & Rice (CD&R), confirmed today they had entered into an agreement with the sites.

The deal involves 337 Morrisons petrol forecourts , including fuel, convenience retail kiosk and ancillary services, as well as more than 400 associated sites across the UK for ultra-rapid electric vehicle (EV) charging development.

There has been speculation for months about the potential of the deal, which will create a new strategic partnership between the two companies in which Morrisons will take a 20% stake in MFG.

Under the terms of the deal, it will enter into commercial and supply agreements with MFG, but Morrisons chairman Sir Terry Leahy said today it planned to use the money to reduce the retailer’s £5bn-plus debt pile.

Morrisons’ huge debt burden is widely seen to have hindered its battle against its rivals in the UK. The deal will allow Morrisons to invest in further moves on price competitiveness, after a series of price investments have so far failed to shift the dial.

CD&R said it was confident there would be no probe from the CMA, with MFG having already sold 87 sites following the Morrisons takeover tio satisfy the regulator’s competition concerns.

The companies said the deal would result in significant investment to expand and improve the convenience retail proposition, with a focus on enhancing the retail environment, food to go and valeting facilities to customers.

Morrisons will continue to supply food and groceries across the forecourts, with the opportunity to expand its supply into the MFG estate over the medium term through its fast-growing wholesale operation.

MFG has also committed to invest and install ultra-rapid EV charging infrastructure across the sites acquired by MFG, significantly expanding its market-leading nationwide EV charging network.

It is targeting the installation of 800 ultra-rapid 150kW EV chargers within the first five years. 

The companies said there are not expected to be any compulsory redundancies after the deal, with all Morrisons forecourt staff offered an in-store position.

Leahy told a press conference this afternoon the move would allow Morrisons to “concentrate on what it does best”.

“We’ve obviously got to ensure the Morrisons brand is a leader in the marketplace and it has money available to innovate and improve its offer, ” he said.

“The deal will allow Morrisons to concentrate on what it does best, which is running supermarkets, c-stores and wholesale.

“We have already made money available, for acquisitions like McColl’s, and we are refreshing 17 supermarkets this year, but suffice to say this dramatically strengthens our financial position.

“In particular we are expanding in wholesale and convenience and online.

“It has to be realised that 80% of the top four supermarkets do not have forecourt operations,” added Leahy.

Morrisons CEO Rami Baitiéh, who will tomorrow deliver its full year results after 12 months in which it has struggled to compete with the discounters and its traditional rivals, said: “As the needs of the customer continue to evolve, Morrisons and MFG’s partnership will see us combine our respective expertise and resources to deliver the best value for customers at the pump, in our convenience stores and in our supermarkets.

“It means Morrisons customers will continue to see a competitive and attractive forecourt offering, including expanded access to EV charging, while also benefiting from greater focus on investment in Morrisons’ core food business,” he added.

“We are delighted to have such a strong partner in MFG and look forward to the opportunities a combined MFG and Morrisons forecourt offering will provide.”

MFG CEO William Bannister said: “This strategic acquisition, and the resulting partnership with the highly respected Morrisons brand, is the next major growth investment for MFG. It is anchored in the potential for us to accelerate the rollout of ultra-rapid EV charging infrastructure across the UK while also giving customers a first-class retail offer.

“We will be there to serve and power our customers, regardless of what car they drive in the years and decades ahead, as we play a key role in keeping the country and its economy moving. We look forward to working with Morrisons to provide best-in-class charging, refuelling and retail experiences for all our customers.”