Morrisons strikes £1bn McColl’s deal

Supermarkets giant Morrisons gave rival Sainsbury’s food for thought over its Nisa takeover today as it unveiled a supply deal thought to be worth £1 billion with McColl’s to bring back the Safeway brand.

Morrisons is to become the sole wholesale supplier for McColl’s, which has 1300 convenience stores and 350 newsagents across the UK, and will replace current suppliers Nisa and Palmer & Harvey.

Sainsbury’s is reported to be eyeing Nisa in a £130 million deal, but an end to Nisa’s £2 billion supply deal with McColl’s, its largest customer, could prompt Sainsbury’s to walk away from an offer.

However, a person familiar with the situation said Sainsbury’s proposal "was not conditional on Nisa retaining the McColls contract".

It comes as competition among the big players in the wholesale market hots up, with Tesco’s £3.7 billion takeover of Booker Group.

The competition watchdog launched an in-depth probe into the deal last month, highlighting concerns about the long-term stability of other wholesalers. Debt-laden cigarettes supplier Palmer & Harvey is seeking a cash injection.

Under chief executive David Potts, Morrisons has canned its convenience stores and become a wholesaler, reviving the Safeway brand 12 years after buying it.

McColl’s shares jumped 19p, or 8%, to 249p.