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An unsolicited £5.5 billion private equity acquisition MorrisonBeing quickly rejected by the supermarket chain may trigger a bidding war against the UK’s fourth-largest grocer and raise concerns that other supermarket groups may be sold to private equity.
On Saturday night, Morrison said it’s already Rejected the initial tender offer Clayton, Dubilier & Rice (CD&R), a US company worth more than 5.5 billion pounds, offered to pay 230 pence per share in cash. On Friday, Morrisons’ share price closed at 178.45 pence, valuing the company at 4.3 billion pounds.
Like its larger rival Tesco, Morrison’s stock price is below pre-pandemic levels because Decline in profits in the past year, Due to the Covid crisis leading to rising costs, offsetting the benefits of sales growth.
The Bradford-based company said its board of directors “unanimously agreed that the conditional proposal seriously underestimated Morrison and its future prospects.” Conditions include completing detailed due diligence and arranging debt financing. CD&R headquartered in New York must submit a firm offer or leave before July 17.
CD&R declined to comment on whether it will return with a higher bid, but analysts said that its approach may be the first of several proposals. They stated that the cash flow and real estate assets of Morrisons and other supermarket groups make them attractive targets for private equity participants.
Private equity companies have Acquire more British companies Dealogic’s data shows that in the past 18 months, the 52 billion pound trading boom has been at any time since the financial crisis, which has triggered people’s worries about “asset divestiture” and unemployment.
Sima Malhotra, Shadow Minister of Commerce and Consumers, said: “Britain supermarkets step up to serve the community during the pandemic. The supermarkets that we play in the center of the community need to put the long-term interests of the company and its employees first. By.
“When Debenhams is bankrupt We see private equity companies leave, and employees are unemployed, and employees who pay for pension plans pay out of their pockets. Cunning private equity firms often leave the company heavily in debt and then leave while pocketing dividends. This must end. “
quick guide
Since the beginning of the Covid crisis, private equity firms’ bids for British companies
Performance
U.S. private equity group Clayton, Dubilier & Rice took the initiative and was quickly rejected Morrison’s acquisition method This is the latest in a series of bids by private equity firms for British companies since the pandemic began.
Asda
Billionaire brothers Mohsin and Zuber Issa Acquired a majority stake in the supermarket chain With TDR Capital, In a £6.8 billion leveraged buyout.
UDG Healthcare
The FTSE 250 Index Pharmaceutical Industry Services Group agreed to a £2.6 billion takeover offer from Clayton, Dubilier and Rice in May.
LV =
The life insurance company originally called Liverpool Victoria agreed Sold itself to Bain Capital for 530 million pounds.
Vectura Group
British pharmaceutical company focuses on inhaled drugs Agreed to acquire for £958 million In May, the global investment company Carlyle Group (Carlyle Group).
John Lane
In May, KKR agreed to acquire UK infrastructure investors In a transaction valued at approximately £2 billion.
St. Modwin
The real estate investment and development group has agreed to be acquired by Blackstone for 1.2 billion pounds.
McCarthy and Stone
This nursing home expert accepted Lone Star’s acquisition offer worth approximately £650 million in 2020.
Worsley
CD&R completed a £308 million acquisition of the plumbing and heating company in February.
Airport Authority
Roadside Assistance Team Agreed to a £219 million takeover offer From TowerBrook and Warburg Pincus, they also agreed to invest 380 million pounds in their huge debt.
Aggreko
The power equipment supplier accepted I Squared Capital and TDR Capital’s £2.3 billion acquisition offer in March.
Bourne Leisure
Even Butlins has been involved in the private equity investment boom. Earlier this year, Blackstone acquired its owner Bourne Leisure.
Asda has Just acquired The acquisition was promoted by the oil forecourt billionaire Isa Brothers and private equity firm TDR Capital with a debt of 6.8 billion pounds. CD&R can merge Morrison, which has few convenience stores, with the auto fuel group, which has 900 gas stations. There are also concerns that it might follow Issas’s approach and let Morrisons take on debt and sell its real estate assets.
CD&R may wait before taking the next step to gauge the reaction of investors and the public.
Morrisons has 121,000 employees, and its annual profit before the pandemic was 408 million pounds, which will be halved to 201 million pounds by 2020.It owns 85% of the freehold ownership of its 497 stores, and Proud of its 19 manufacturing bases Including bakeries, slaughterhouses, fishing fleets and egg farms. A quarter of its sales come from its own supply chain.
Among CD&R’s advisors is Sir Terry Leahy, the former CEO of Tesco. Morrison’s acquisition will reunite him with Morrison Chairman Andrew Higginson and CEO David Potts, both of whom are working with Leahy at Tesco.
Bryan Roberts, a retail analyst at business consulting firm Shopfloor Insights, argued that CD&R has already cooperated with the B&M discount chain. Sold in 2018 After making a profit of £1 billion from a successful stock market listing, they are “responsible investors”. He estimated that a successful acquisition of Morrison would require a value of more than 300 pence per share.
He said that other private equity groups, such as KKR and Amazon, may join the competition. Collaborate with Morrison And provide same-day grocery delivery service.
For competitive reasons, acquisitions or mergers between supermarket groups look unlikely-Sainsbury’s acquisition of rival Asda for £7 billion Blocked by the UK competition regulator Two years ago, the court ruled that the transaction could push up prices and reduce the selection and quality of products sold in stores. “But for private equity investors, this is a game,” Roberts said.
Analysts said that even Tesco, the UK’s largest retailer with a market value of 17 billion pounds, may be acquired by private equity.
An analyst said: “Now the entire industry is playing a role. It is not unrealistic to say that there will not be a British supermarket left in the foreseeable future.”
In Sainsbury’s, the second largest supermarket chain in the UK, Daniel Křetínský, a Czech businessman known as the “Czech Sphinx,” holds 10% of the shares. His attempt to take over the German Metro Group failed last year, and he regarded supermarkets as a stable investment.
Independent retail analyst Nick Bubb said: “I doubt [Morrisons] The transaction can be reached at 250p-260p, after which the focus will increase the potential dissolution of Sainsbury and even Tesco, so the stock market should be a lively day tomorrow. I certainly don’t want to be a hedge fund that lacks any of the Big Three. “
He pointed out that Morrison’s stock price has been trading sideways at around 180 pence for most of the past 18 months. “Given the growth of Aldi and Lidl and the growth of online shopping, there are many bears who believe that the capacity of the supermarket business is too large and that people like Morrisons will be squeezed.”
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