Morrisons in Multi-billion Pound Bidding War: Shares Rocket to Five-year High

In 1956, William’s son, Ken Morrison, took over the operations of the small network of grocery stores that by that time bore the Morrisons name across the nearby Yorkshire towns, and it was his business acumen that took his father’s hard work into the massive empire that it is today.

For those who remember Morrisons’ foray out of Yorkshire which was greeted by amusing stereotype images of bags of coal for sale or a delicatessen counter that sold only pies when the first Morrisons supermarket that made its way south of Watford Gap Services on the M1 opened in Letchworth Garden City, it is no longer a laughing matter.

Morrisons is now the subject of a fierce bidding war as large institutions fight to buy it at multi-billion-pound sums.

Last week, it was assumed a done deal when the company came under acquisition talks from US private equity firm Clayton, Dubilier & Rice which wanted to buy Morrisons for a princely £5.5 billion, however since then, many more potential acquirers have got in on the action, resulting in an almost auction-like stand-off between potential investors.

Over the weekend, SoftBank-backed Fortress Investment struck a £6.3 billion deal to buy Morrisons, resulting in a massive rise in share price of over 28 points this morning to 266.8p. That’s an astronomical 11.23%.

It’s also a five-year high.

Confidence by investors has been massaged by Morrisons’ fortuitous position of being able to turn down massive offers as others materialize, and as a result, two weeks ago, the company’s share price rose by 35%, and has been steadily going up since.

Today’s rocketing value as a superior deal was sealed is further testimony to that.

As Omar has sung in 1993, It ain’t over till it’s over, and this is certainly the case today as Fortress’ bid of £6.3 billion is looking set to be challenged by another private equity firm, this time Apollo, which has admitted that it is considering a higher bid.

Apollo became the third potential suitor to declare an interest in Morrisons, announcing to the stock exchange on Monday that it was “in the preliminary stages of evaluating a possible offer for Morrisons”, in a move that could trump a £6.3bn bid by a consortium led by the US investment fund Fortress, the owner of Majestic Wine.

Whether any of these bids will result in a signed and sealed acquisition is yet to be known, particularly considering that Morrisons has a history of failed takeover bids behind it, however this time it is very different in that potential acquirers are literally tripping over themselves to outbid each other.

For example, in February 2014, it emerged that younger members of the founding Morrison family, who owned 10% of the company and who were thought to include two of Honorary President Sir Ken Morrison’s children, William Morrison Junior and Andrea Shelley, along with Sir Ken Morrison’s niece and her husband, Susan and Nigel Pritchard, had approached a number of private equity firms about taking the company private.

They were said to be extremely unhappy about the company’s disastrous financial performance, and the corporate strategy being undertaken by Dalton Philips.

At that time, straight-talking Yorkshireman Sir Ken Morrison blasted Dalton Philips and his new board of directors for destroying the company he inherited from his father. Sir Ken remarked disdainfully on Philips’s strategy to save the failing supermarket from the pressures of Aldi and other discounter stores.

Following on in this bold as brass tradition, Morrisons continued as a publicly listed firm and when the latest round of acquisition attempts approached it, the firm rejected Clayton, Dubilier and Rice’s £5.5 billion bid, deeming it to “significantly undervalue” the company, leading to a host of other bids that we now see.

Morrisons has a lot of freehold property, and some analysts think that private equity firms could be showing this much interest in Morrisons partly because of its property portfolio, which they would ‘sale and leaseback’ to generate cash to pay back to themselves.

With sensationalist mainstream media having touted that ‘Morrisons has been sold to Americans’ over the weekend, only to wake up this morning and find that it has not yet been sold and there are more bids, volatility is being stoked.

Will it sell and continue to show high share price rises, or will all talks fail and the share price go down to its relatively low level?

All currently hangs in the balance.


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Apollo Global Joins Battle for Britain’s Morrisons

By James Davey

U.S. group Apollo, which last year missed out on buying Asda, the No. 3 grocery player in the United Kingdom, said it was in the preliminary stages of evaluating a possible offer for Morrisons but had not approached its board.

On Saturday Morrisons agreed to a takeover led by SoftBank owned Fortress Investment Group that valued the firm at 6.3 billion pounds ($8.7 billion).

The offer from Fortress, along with Canada Pension Plan Investment Board and Koch Real Estate Investments, exceeded a 5.52 billion pound unsolicited proposal from Clayton, Dubilier & Rice (CD&R), which Morrisons rejected on June 19.

However, it was less than the 6.5 billion pounds asked for by top 10 Morrisons investor JO Hambro last week.

Analysts have speculated that other private equity groups and Amazon, which has a partnership deal with Morrisons, could create a potential bidding war.

Under British takeover rules CD&R has until July 17 to come back with a firm offer.

The Takeover Panel is yet to announce the deadline by which Apollo must clarify its intentions in relation to Morrisons.

The interest in Morrisons underlines the growing appetite from private funds for British supermarket chains, which are seen as attractive because of their cash generation and freehold assets. The funds believe the stock market is not recognising the grocers’ value in the wake of the COVID-19 pandemic.

Last year Apollo lost out on buying Asda, Britain’s third largest supermarket group, to the Issa brothers and TDR Capital.

Apollo says its private equity business had more than $89 billion in assets under management by the end of March 2021, in 150 companies such as Watches of Switzerland, TMT group Endemol Shine, bookmaker Ladbrokes Coral and Norwegian Cruise Line.

($1 = 0.7232 pounds)

(Reporting by James Davey; Editing by Kate Holton/Guy Faulconbridge)