British supermarket major Morrisons has proposed a rescue deal to help avert the collapse of McColl's, Sky News reported on Friday, a day after the convenience store chain warned of an increasing likelihood of going into administration.
McColl's shares slumped as much as 55% in early trade, before reversing course to trade about 21% higher at 1.42 pence on hopes of a lifeline. The stock had lost roughly 90% in value this year, excluding the latest moves.
The Sky News report said the proposal from Morrisons, which has a wholesale tie-up with McColl's, would see the former repaying the latter's lenders in full and preserving the vast majority of its shops and jobs, citing an insider and people familiar with the matter.
Morrisons and McColl's declined to comment.
Cash-strapped McColl's has been scrambling to get short-term funding to stay afloat and wider challenges in the British retail industry, including the recent cost-of-living crisis and supply chain issues, have further challenged the sector.
The company reiterated on Thursday it was still in talks over potential financing to resolve the funding issues and create a stable platform for the business.
"Even if a successful outcome is achieved, it is likely to result in little or no value being attributed to the group's ordinary shares," McColl's said on Thursday
The 1,100-store-strong group runs McColl's and Morrisons Daily branded convenience stores as well as Martin's newsagents and employs about 16,000 people.