MBL: Morrisons Terminates Contracts, MBL Now In An Offer Period

MBL Group PLC (MUBL.LN), said Tuesday that it has received formal notification from its major customer, Wm Morrisons Supermarket PLC (MRW.LN), of the termination of its two existing supply agreements with MBL, adding that it is now in an offer period.

MAIN FACTS:

-KPMG Corporate Finance is to be appointed to seek a suitable purchaser for the Group.

-As such this may or may not result in an offer for the entire issued share capital of MBL, though there can be no certainty that any offer will be forthcoming.

-The final termination date of the agreements will be Sept. 14.

-In the financial year ended March 31, 2010, 78% of MBL turnover related to sales to Morrisons.

-The notification is a significant disappointment to MBL which has had a successful long-term commercial relationship with Morrisons for 14 years.

-The Board of MBL had been in negotiations with Morrisons for several months regarding a future commercial relationship but have also been notified that they have been unsuccessful in securing the third party logistics service tender.

-MBL previously announced that Morrisons had decided to move away from the existing full supply arrangements provided by MBL.

-The announcement will necessitate a significant downsizing of operations and with regret the resultant loss of employment for many of our employees.

-The company is commencing discussions with Morrisons and the new service provider regarding those employees who will be in scope for TUPE (Transfer of Undertakings (Protection of Employment) Regulations) at the end of the agreements.

-Negotiations are also continuing regarding the stock balances which MBL has purchased in support of the existing agreements and which represent a high proportion of the total stock balances of the Group.

-Further to the announcement made on Jan. 31, the Board would like to confirm that Steven Walsh-Hill will be leaving the business by mutual agreement with immediate effect.

-This is due to being unable to reach agreement on the terms of Walsh-Hill's appointment.

-MBL shares closed Monday at GBP0.31, valuing the company at GBP5.36 million.

-By Razak Musah Baba, Dow Jones Newswires; 44-20-7842-9275; [e-mail]