LONDON – (AP) – A US private equity group has eliminated a rival to narrowly win the battle to buy UK supermarket chain Morrisons following a spectacular Saturday auction for the company.
The UK acquisition group said New York-based Clayton, Dubilier & Rice (CD&R) was offering 287 pence for each Morrisons share, a dime more than Fortress’s bid, which is backed by the Japanese bank. Softbank.
The winning bid values Morrisons at nearly £ 7 billion ($ 9.5 billion) and will be voted on by shareholders on October 19.
Morrisons is Britain’s fourth largest food retailer, employing around 110,000 people in nearly 500 stores and over 300 gas stations.
CD&R is one of the most established investors in the industry and has been advised by Terry Leahy, the former boss of Tesco, Britain’s largest supermarket chain, for the past 10 years.
He first made an approach for the supermarket in June, which led to speculation the industry was ripe for private equity takeovers. Fortress then made a £ 6.3bn offer in July, raising it to £ 6.7bn a month later, which the board agreed to. Later in August, CD&R returned with an increased bid of £ 7 billion, which led the board to withdraw support for the Fortress bid and back the higher bid.
But because neither party made a formal offer, the Takeover Panel launched an auction process. Both sides agreed beforehand that all offers would be at a fixed cash price and could not include stakes in other companies or dividends to shareholders.
Both sides were keen to stress that they wanted to defend the supermarket’s values and tried to push back on suggestions that they would start selling large swathes of the company’s real estate assets.
Private equity firms typically acquire undervalued companies and then look for ways to cut costs and increase profits before selling them for a profit. British assets are widely seen as cheaper than they otherwise would have been due to Britain’s departure from the European Union and the coronavirus pandemic.
Morrisons appears to be an attractive private equity opportunity as its value was below pre-pandemic levels despite strong recent income.
Morrisons was founded in 1899 as an egg and butter stand in a market in the town of Bradford, in the north of England. It gradually grew and became a publicly traded company in 1967. It expanded further in 2004 with the acquisition of rival Safeway, an initiative that strengthened its presence in the south of England.
The company is now largely owned by a host of institutional shareholders, including Silchester International, Columbia, Blackrock and Schroders.
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