London-Clayton, Dubillier & Rice (CD&R) has won an auction for Morrisons with a £7 billion ($9.5 billion) bid, allowing the US private equity firm to take control of Britain’s fourth-largest supermarket conglomerate. The way has been cleared.
Morrison’s board on Saturday recommended CD&R’s bid of 287 pence per share, hours after a consortium led by SoftBank-owned Fortress Investment Group offered just a penny less at 286 pence per share.
CD&R’s victory marks a triumphant return to the UK grocery sector for Terry Leahy, former chief executive officer of Britain’s largest supermarket chain Tesco, who is CD&R’s senior advisor.
The board recommended that shareholders vote in favor of the 287 pence per share proposal at its October 19 meeting, saying that the private equity group had confirmed that its previously stated intentions towards Morrison remained unchanged.
“Today’s final offering of CD&R represents outstanding value for shareholders, while simultaneously protecting Morrison’s fundamental character for all stakeholders,” Morrison’s President Andrew Higginson said in a statement.
If shareholders approve the proposal, CD&R could complete its acquisition by the end of the month, making Morrisons the second UK supermarket chain in a year to be acquired by private equity. 3 Player Asda, completed in Feb.
eggs and butter
CD&R has committed to maintaining Morrison’s headquarters in Bradford, northern England and its current management team led by CEO David Potts.
It also says it will execute the supermarket chain’s existing strategy, not sell its freehold store assets and maintain employee pay rates.
However, these commitments are not legally binding.
Morrison started out as an egg and butter merchant in 1899. It listed its shares in 1967 and is the UK’s fourth largest grocer after Tesco, Sainsbury’s and Asda.
The takeover battle that has been going on since May is the most high-profile of bids for British companies this year, reflecting private equity’s appetite for the UK’s cash-generating assets.
CD&R’s winning bid was only marginally higher than its 285 pence per share offer that had been recommended in August.
The final offer represents a 61 percent premium over Morrison’s stock price before the acquisition interest was publicly revealed in mid-June. Some analysts have said that the winner may have to sell off assets like factories, warehouses or shops to get good returns.
CD&R could combine its 918 Motor Fuel Group (MFG) fuel forecourt with the Morrison-owned 339, opening Morrison convenience stores at the sites, but that could face scrutiny from the competition regulator.
Leahy was Tesco’s CEO for 14 years to 2011 and will now be reunited with Morrison’s Potts and Higginson, two of his closest lieutenants at Tesco.
Potts, who joined Tesco as a 16-year-old shelf-stacker, would make more than £10 million from selling his Morrison shares to CD&R. Chief Operating Officer Trevor Strain will pocket approximately £4 million.
The fort is abandoned to lick its wounds and recoup the cost of the saga. Documents published in July showed Fort expected to incur banking and advisory fees and £263.5 million.
Fortress said in a statement: “The UK remains a very attractive investment environment from many perspectives, and we will continue to explore opportunities to help strengthen our management teams grow their businesses and create long-term value.”
Sainsbury’s has been touted as another potential target for private equity and investment companies in recent months.
by James Dewey and Sarah Young
This News Originally From – The Epoch Times