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Highlights
- Morrison (WM) Supermarkets Plc accepted an improved takeover bid of £7 billion or 285 pence per share from US-based Clayton, Dubilier & Rice (CD&R).
- Morrisons rejected the equity firm’s earlier offer of £5.5 billion or 230 pence a share in June on the grounds of undervaluation of the company and assets.
- Regulators gave CD&R time until 20 August to get back with a revised offer or quit.
UK’s fourth-largest supermarket chain Morrison (WM) Supermarkets Plc (LON: MRW), accepted an improved takeover bid of £7 billion or 285 pence per share from US-based Clayton, Dubilier & Rice (CD&R), an American private equity firm, which initially was said to be undervaluing the company.
Morrisons had rejected the equity firm’s earlier offer of £5.5 billion or 230 pence a share in June this year. However, regulators gave the equity firm time until 20 August to revise their bid or quit. The new offer bid is a 60% premium to the supermarkets share price on 18 June 2021, the day before the news of bid interest in the company was first made public.
Bradford-based Morrisons boasts of a network of 500 shops and nearly 110,000 employees. The company is a constituent of the FTSE 250 Index, and its shares traded at GBX 279.20, and its market capitalisation stood at £6,800.02 million as of 19 August 2021.
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The story behind Fortress bid rejection
The improved bid led to the rejection of a £6.7 billion bid from rival business Fortress Group, initially recommended to shareholders as the potential acquirers. Earlier this month, Fortress, the owner of Majestic Wine, tried to compete with rival CD&R by increasing its offer to 270 pence per share and a special dividend of 2 pence per share, which represents an increase of £400 million on its initial offer of £6.3 billion made in July. The increase in Fortress’ offer was proposed after Silchester International Investors, Morrisons’ biggest shareholder with a 15% stake, refused to support Fortress Group’s initial offer of 254 pence per share.
Morrisons’ shareholders have been requested to vote in favour of the CD&R’s takeover bid at a meeting slated to be held in October 2021. The bid will offer shareholders good value while simultaneously protecting the company’s fundamental character.
Rising American interest in UK companies – A boon or bane?
The takeover bid is another among the rising American investor interest in Britain-based companies. Unions have been raising concerns over the wave of private equity acquisitions gripping UK-based firms, which may strip local companies of their property holdings, increase debts, and may result in deterioration of worker conditions.
CD&R assurance
CD&R offer aims at supporting Morrisons to carry the brand legacy and expand in the grocery retailing segment with capital and new technology innovation. As a part of the deal, the private equity investor assured that its headquarters would remain in Bradford and clarified that it does not intend to sell off its business to raise cash. CD&R announced full support to Morrisons’ recent pay award announcement of a minimum of £10 per hour for all stores and manufacturing site employees and no change to the benefits offered by its pension schemes.
