Morrisons has announced a significant financial manoeuvre to reduce its debt by £331 million.
- A 45-year ground rent agreement has been inked with Song Capital, a real estate investor.
- Morrisons maintains control and ownership of its retail stores’ freehold despite the deal.
- The transaction arrives after Morrisons’ purchase by Clayton Dubilier & Rice.
- Morrisons anticipates improved financial stability and growth for the upcoming fiscal year.
Morrisons, one of the UK’s leading supermarket chains, has confirmed a strategic move to reduce its debt by £331 million. This substantial decrease is facilitated through a newly established 45-year ground rent deal with Song Capital, a notable real estate investment firm. Despite this arrangement, Morrissons will retain ownership of the freehold for 75 of its store locations, ensuring continued control over its retail assets.
This announcement was made concurrently with the release of Morrisons’ quarterly results on 26 September. Clayton Dubilier & Rice, the equity firm that acquired Morrisons in a £10 billion deal in October 2021, initially stipulated that Morrisons could not divest its store freeholds. However, with the expiration of this condition, the supermarket chain is now positioned to bolster its financial standing through this new transaction.
Jo Goff, the Chief Financial Officer of Morrisons, remarked on the company’s robust performance across various segments, noting growth in supermarkets, online platforms, convenience stores, and its wholesale and Myton Food businesses. She stated, “The properties will remain under Morrisons’ control and our retail estate remains over 80% freehold.” This decision follows earlier deleveraging strategies, including the divestment of Morrisons’ forecourt business.
The proceeds from this ground rent transaction will further contribute to Morrisons’ financial goals, particularly in reducing its debt on a pro-forma basis to £3.6 billion—a significant 41% decrease from its previous peak. Goff also projected an increase in EBITDA and further operational advancements by the end of the full year.
Morrisons’ executives anticipate that this deal will not only enhance the company’s financial health but also strengthen its market position, providing ample opportunities for operational progress and increased profitability.
Overall, Morrisons’ strategic debt reduction initiative marks a significant step in solidifying its financial and operational structure.
