CD&R’s Morrisons sells petrol forecourts to sister company MFG for £2.5bn

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Private-equity owned UK supermarket chain Wm Morrison has agreed a £2.5bn deal to sell its petrol forecourt business to sister company Motor Fuel Group, in a move that will help Morrisons shore up its balance sheet. 

Both companies are owned by US buyout firm Clayton, Dubilier & Rice. Under the terms of the deal, Morrisons will retain a 20 per cent stake in the enlarged MFG, and is expected to receive about £1.8bn to £1.9bn in proceeds.

The deal comes as Morrisons seeks to improve its sales performance under new chief executive Rami Baitiéh and service its £5.5bn net debt pile following sale-and-leaseback deals on some of its properties.

Sir Terry Leahy, a senior adviser at CD&R and chair of Morrisons, said the grocer’s balance sheet will be strengthened by the deal but insisted it was not “the only consideration” and added it would benefit both businesses.

The purchase will allow MFG to expand its electric vehicle footprint across the UK, from 130 sites currently electrified to 800 by 2030, as well as bolster its convenience store offering, the companies said.

Leahy declined to say how the fresh capital would be deployed by Morrisons, adding: “We don’t give a breakdown between the investment [in the business] and the reduction in debt.” He said “nothing was coming out of the business” and no proceeds from the deal would go back to CD&R.

Clive Black, a retail analyst at Shore Capital, said: “Should CD&R sell MFG, which it has owned for some years, that equity holding of Morrisons could be quite relevant.”

Morrisons’ “very stretched balance sheet” was probably the prime motive for the transaction, he added, “and so notable debt reduction would be welcome”.

Tuesday’s transaction mirrors a deal by rival private equity firm TDR last year, which jointly owns supermarket chain Asda and forecourt business EG Group with the Issa brothers. The grocer acquired 350 petrol stations and more than 1,000 food-to-go sites which were previously owned by EG Group.

CD&R bought MFG for £500mn nearly a decade ago. Since then, the buyout group has expanded the business including through acquisitions and MFG is now the UK’s leading independent petrol forecourt operator with roughly 900 sites.

The company has sought to capitalise on the shift to electric cars by developing ultrarapid charging hubs for these types of vehicles.

Leahy said Morrisons’ petrol station business was “better in the hands of a specialist . . . that understands how to develop the forecourts . . . and manage the transition to EV [charging points]”.

CD&R agreed a near-£10bn deal to buy Morrisons in 2021 after a bidding war with a rival firm. The acquisition, funded by billions of pounds of debt, has come under pressure as interest rates have risen.

The company has also had to contend with fierce competition from rival supermarkets which has led to Morrisons losing market share.

Asda and Morrisons respectively reported 2.8 per cent and 2.3 per cent growth in like-for-like non-fuel retail sales for their third quarters ended September and July 2023, compared with 8.4 per cent for Tesco and 6.6 per cent for Sainsbury’s in their quarters ended August and September respectively. Both Tesco and Sainsbury’s gained market share from Asda and Morrisons in the period, according to Moody’s.