What would a sale by Morrisons mean to M Local?

Over the weekend, rumours surfaced that Morrisons have entered into negotiations to sell M Local to Greybull Capital. That is not altogether a surprise and I have been saying to potential investors in our new C store real estate fund that an exit was a possibility.

My view is, that in the hands of the right management, there is the core of a successful business here, with 150 stores and the distribution infrastructure to service them. There is a good brand in M Local and provided a mutually beneficial supply agreement can be negotiated as part of the sale I see no reason that a 'franchised' model cannot work both for the new owners and for Morrisons.

After all, It is not a new model in the sector, with SSP Group plc running many Simply Food stores and Tesco increasingly looking to the franchise model for new One Stop openings.

It makes sense for Morrisons to concentrate its capital spend on the core large store estate and to outsource the not inconsiderable capex needed to grow the convenience business. And growth will be key, with in my view at least a doubling of the store numbers needed to achieve critical mass. With each new C store costing up to £1m to convert and fit-out, that is a significant capital commitment.

Of course it is possible that the sale is merely a prelude to a wind-up, but don't bet on it. My guess is that Greybull have long term plans for the M Local business.