European Stocks Add to Losses on Growth Worries

The pan-European STOXX 600 index slipped 0.2% by 07:18 GMT, holding near a two-month low hit in last week’s selloff.

Banks, automakers and luxury stocks were the top decliners on fears of a slowdown in global growth as the world’s second largest economy deals with fresh COVID-19 restrictions, a property sector slowdown and regulatory clampdowns.

French luxury stocks Kering and LVMH, which draw a major portion of their revenue from China, fell 1.9% and 1.5% respectively.

Morrisons fell 3.8% after U.S. private equity firm Clayton, Dubilier & Rice (CD&R) won the auction for Britain’s supermarket group with a 7 billion pound ($9.5 billion) bid.

Rivals Tesco and Sainsbury inched up.

UK telecoms group BT Group and Nordea Bank were the top losers on STOXX 600, down more than 6% each.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Saumyadeb Chakrabarty)

 

European Shares End Higher on Commodity Recovery After Bruising Week

The pan-European STOXX 600 index closed 0.7% higher after losing nearly 1.5% last week. Oil and mining were the best performing sectors, rising about 2.1% and 1.5% respectively.

Sentiment appeared to have improved after growing uncertainty over when the U.S. Federal Reserve would begin tightening policy, which sparked a broad selloff across global markets last week.

Focus now turns to the Fed’s annual Jackson Hole Economic Policy Symposium beginning later in the week.

“With the Jackson Hole meeting beginning on Thursday, investors may be reluctant to make big new commitments in the next couple of sessions,” Ian Williams, economics & strategy research analyst at Peel Hunt, said.

Data in Europe suggested that business activity remained strong in August, albeit at a slightly slower growth pace than the two-decade peak seen in July.

With a nearly 18% rise so far this year, the STOXX 600 hit a record high earlier this month, but has stumbled recently on concerns over the Delta variant of COVID-19 stalling economic growth.

Among individual stocks, Britain’s second-largest grocer Sainsbury’s jumped 15.4% and was the best performer on the STOXX 600, following a report that private equity firms were circling the company with a view of possibly launching bids of more than 7 billion pounds ($9.5 billion).

Last week, smaller rival Morrisons backed a 7 billion pounds offer from U.S. private equity group Clayton, Dubilier & Rice.

Germany’s BioNTech surged 7.6% after the U.S. Food and Drug Administration granted full approval to the Pfizer Inc/BioNTech COVID-19 vaccine.

Luxury stocks including LVMH, Kering and Moncler clawed back some of last week’s losses after being sold off on China’s wealth redistribution plans.

Switzerland-based Cembra Money Bank plunged 30.9% to the bottom of the STOXX 600 after it terminated its credit card partnership with Swiss retailer Migros.

French lottery operator La Francaise des Jeux fell 1.7% after Goldman Sachs downgraded the stock to “sell”.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sruthi Shankar and Ambar Warrick in Bengaluru; Editing by Shounak Dasgupta and David Holmes)

European Stocks End Higher but Log Worst Week in 6 Months

The pan-European STOXX 600 index was up 0.3%, with the retail sector gaining 1.2%.

British retailer Marks & Spencer jumped 14.1% to the top of the STOXX 600, as it hiked its profit outlook after a jump in demand for food and a surge in online clothes’ orders indicated that its latest turnaround plan was starting to deliver.

London’s FTSE 100 index rose 0.4%, while Germany’s DAX was up 0.3%. Frankfurt shares recovered from a fall earlier in the session after data showed a bigger-than-expected jump in producer prices in July.

The mining index ended flat, becoming the worst performing European sector for the week.

Signs of a slowdown in the global economic recovery and a surge in cases of the Delta variant of the coronavirus have knocked Europe’s STOXX 600 off record highs this week.

The index slumped 1.5% on Thursday alone, tracking a fall in global equities on indications the U.S. Federal Reserve could start reining in easy money policies later this year.

“Progress made by countries in dealing with COVID-19 still seems to have had little bearing, in general, on the relative performance of their stock markets,” said Bethany Beckett, UK economist at Capital Economics.

“Instead, swings in sentiment about the virus at a global level appear to have continued to exert a bigger influence via sector rotation.” Beckett expects this trend to persist.

Focus next week will be on the high-profile annual U.S. Jackson Hole central bankers’ conference, where Fed Chair Jerome Powell could signal he is ready to start easing monetary support.

ECB President Christine Lagarde will not attend the conference, a spokesperson for the central bank said this week.

Luxury goods rebounded from declines earlier in the day to gain 0.5%, but fell 5.5% over the week, pressured by worries over possible wealth policy developments in China.

UK supermarket Morrisons rose 4.2% after agreeing to a takeover offer worth 7.0 billion pounds ($9.54 billion), while Swedish real estate web portal Hemnet surged 27.8% on an upbeat quarterly report.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Sagarika Jaisinghani and Shreyashi Sanyal in Bengaluru; editing by Uttaresh.V, Kirsten Donovan)

 

Private Equity Firm CD&R Set to Make Counter Bid for UK’s Morrisons -Report

Morrisons rejected an unsolicited 5.52 billion pound ($7.68 billion) proposal from CD&R in June and this month backed a 6.3 billion pound offer from a group led by SoftBank Group Corp-owned Fortress.

The Sunday Times said CD&R was understood to have been preparing equity and debt financing for a counter bid which could come in the next few days.

If successful, CD&R would open Morrisons convenience stores at fuel stations operated by Motor Fuel Group, which CD&R owns, and it would work alongside the existing Morrisons’ management team, the Sunday Times said.

Britain’s Takeover Panel, which regulates corporate transactions, said last month it had given CD&R until Aug. 9 to announce a firm intention to make an offer or walk away.

A spokesman for CD&R declined to comment on the Sunday Times report.

Last week, British money manager M&G, which owns a 1.08% stake in Morrisons, joined criticism of the Fortress-led bid, saying it did not reflect the true value of the company.

Morrisons’ largest shareholder Silchester has also said it is not inclined to support the offer for Britain’s fourth-largest supermarket chain. Schroders Plc, also an investor in Morrisons, is still considering how it will vote.

A third private equity suitor Apollo Global Management said last month it would not pursue a solo offer for Morrisons but could join the Fortress consortium.

Shareholders in Morrisons are due to vote on the Fortress offer on Aug. 16.

($1 = 0.7191 pounds)

(Reporting by William Schomberg and Paul Sandle; Editing by Giles Elgood, Cynthia Osterman and Susan Fenton)

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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Morrisons Leaps After $7.6 Billion Private Equity Offer Rejected

By James Davey

Morrisons, Britain’s fourth-largest grocer by sales behind market leader Tesco, Sainsbury’s and Asda, said on Saturday that it had rejected a proposed 5.52 billion pounds ($7.62 billion) cash offer from CD&R.

The approach underlines private equity’s growing appetite for supermarkets in Britain, attracted by their steady cash generation and freehold real estate assets.

Morrisons said CD&R’s offer of 230 pence per share, a 29% premium to Friday’s closing price, “significantly undervalued” the group and its prospects. Including net debt of 3.17 billion pounds, CD&R’s offer price gives Morrisons an enterprise value of 8.7 billion pounds.

Shares in Morrisons were up 56.7 pence to 235.2 pence at 1059 GMT, as some analysts said they expected CD&R to assess investor reaction before deciding on its next move.

Under British takeover rules CD&R, which has former Tesco boss Terry Leahy as a senior adviser, has until July 17 to announce a firm intention to make an offer or walk away.

Shares in rivals Tesco, Sainsbury’s and Marks & Spencer rose as much as 3.2%, 5.7% and 4.1% respectively on hopes that the whole sector could be in play, analysts said, adding that some short sellers were also closing out positions.

Silchester and Columbia Threadneedle, Morrisons’ two largest investors, which Refinitiv data showed having stakes of 15% and 7.4% respectively, both declined to comment.

In addition to the possibility of other private equity players entering the fray there has long been speculation that online shopping giant Amazon, which has a partnership agreement with Morrisons, could emerge as a possible bidder.

Morrisons, unique among British supermarket groups in making over half of the fresh food it sells, trades from about 500 stores and has 118,000 staff, making it one of the country’s biggest private sector employers.

Britain’s opposition Labour Party warned on Sunday that a private equity acquisition of Morrisons could put jobs at risk.

Shopworkers union Usdaw, which represents Morrisons staff, had no immediate comment.

SECTOR IN FOCUS

Industry executives and some sector analysts believe the stock market has failed to recognise the inherent value in Britain’s listed supermarket groups.

They argue that if equity markets do not value them appropriately, acquirers will.

“Investors want a very binary story about knuckling down, keeping capex to a minimum and just becoming a cash machine,” one senior supermarket executive told Reuters.

Zuber and Mohsin Issa in February joined forces with private equity firm TDR Capital to buy a majority stake in Asda from Walmart in a deal valuing the group at 6.8 billion pounds.

And in April, Czech billionaire Daniel Kretinsky raised his stake in Sainsbury’s to almost 10%, fuelling bid speculation.

Shares in both Morrisons and Tesco closed below their pre-coronavirus pandemic levels on Friday.

While sales have soared at all British supermarket groups during the coronavirus crisis, their profits have fallen sharply because of the huge extra costs incurred.

($1 = 0.7243 pounds)

(Reporting by James DaveyAdditional reporting by Simon Jessop and Thyagaraju Adinarayan; Editing by David Goodman and Alexander Smith)