- WM Morrisons Supermarkets has agreed to an all-cash takeover offer worth up to £6.3 billion from a group of investors led by Softbank Group owned investment management firm Fortress Investment Group.
- The takeover deal values Morrisons at 252 pence in cash per share and an additional 2 pence special cash dividend, and also has a debt component worth up to £3.2 billion, thus bringing the total deal value to £9.5 billion.
- The other investment management companies backing the offer include Canada Pension Plan Investment Board and Koch Real Estate Investments.
UK’s fourth largest supermarket chain WM Morrisons Supermarkets PLC (LON: MRW) announced that it had reached an agreement for an all cash takeover offer from a group of investment management firms in a deal worth up to £6.3 billion on 3 July. The stocks of WM Morrisons Supermarkets’ shares surged by 11 per cent on the news.
The takeover bid is led by US investment management firm Fortress Investment Group, which is owned by Japanese multinational conglomerate holding firm Softbank Group Corp. Some of the other investment companies in the consortium backing the offer includes investment management company Canada Pension Plan Investment Board and Koch Real Estate Investments, which is an affiliate of Koch Industries Inc.
According to the takeover deal, Morrisons will be valued at 252 pence per share in cash and an additional 2 pence special cash dividend from Oppidum Bidco Limited.
The deal values the supermarket company at a premium of 42 per cent from its closing price of GBX 178 on 18 June, which was the last business day before the offer period began. The offer also implies an enterprise value multiple of about 8.3 times the supermarket chain’s underlying earnings before interest, taxes, depreciation & amortisation (EBITDA), for the 52-week period ending on 31 January.
Moreover, the deal also includes £3.2 billion in debt, thus bringing the total takeover offer worth up to £9.5 billion including debt recovery. The final clearance to the deal on shareholders approval.
However, within hours of the takeover offer, a counter bid was received from private equity company Apollo Global Management, according to the Sunday Telegraph. Apollo Global Management had previously missed out on a bidding war to buy UK supermarket chain Asda
Fortress Investment Group had previously made an offer priced at 220 pence per share on 4 May which was not made public. The investment management company had then made four more proposals before arriving at the takeover offer of 254 pence per share on 5 June.
The takeover offer also comes just weeks after Morrisons had rejected a takeover bid from private equity firm Clayton Dubilier & Rice in June for £5.5 billion. Morrisons had cited the private equity firm’s offer had valued the company too low as the reason for rejecting the offer.
Fortress Investment Group has previously invested in Majestic Wine in the UK and has invested in the grocery retail sector in the North American and European region. Fortress’ assets under management (AUM) stands at about US $53 billion as of March 2021.
Morrison has up to 500 stores in the UK and employs about 110,000 people and owns up to 85 per cent of its freehold estate.
FTSE 250 listed WM Morrisons Supermarkets’ shares traded at GBX 266.00, up sharply by 10.93 per cent on 5 July at 08:07 AM GMT+1, reacting positively to the takeover news, which was announced over the weekend. Morrisons’ market cap stood at £5.779 billion and its year to date return stood at 51.11 per cent.
Comparatively, the FTSE 250 index was trading at 22,755.81, up by a modest 0.04 per cent. While the personal care, drug and grocery store sector index was trading at 4,465.60, up by 0.12 per cent.