Apollo Global joins the Battle of Morrison, UK Reuters

By James David

LONDON (Reuters)-On Monday, Morrison, the UK’s fourth-largest supermarket group, intensified its $8.7 billion bidding war. The third private equity group Apollo Global Management (New York Stock Exchange stock code: ) Join the competition.

The American group Apollo missed the opportunity to acquire Asda, the third-largest grocery company in the UK last year. The group said it is in the preliminary stages of evaluating a possible offer for Morrison, but has not yet contacted its board of directors.

On Saturday, Morrison said that the board of directors led by Chairman Andrew Higginson recommended the acquisition of a company led by SoftBank’s Fortress Investment Group, valuing the company at £6.3 billion. (8.7 billion US dollars).

Fortress and the Canadian Pension Plan Investment Board and Koch Real Estate Investments made offers that exceeded the 5.52 billion pound unsolicited proposal made by Clayton, Dubilier & Rice (CD&R), but Morrison rejected the proposal on June 19.

However, this is lower than the £6.5 billion requested by JO Hambro, Morrison’s top ten investor, last week.

Ultimately, Morrison’s fate will be determined by its shareholders. According to the current situation, they will vote on the fortress transaction.

Morrisons’ three largest investors Silchester, Blackrock (NYSE:) and Columbia Threadneedle (Refinitiv data show that they hold 15.2%, 9.6% and 9.4% of the shares respectively) are actually kings. So far, no one has commented.

Analysts speculate that other private equity groups and Amazon (NASDAQ:), which have reached a cooperation agreement with Morrison, may trigger a potential bidding war.

At 0735 GMT, Morrison’s share price rose 11.4% to 267.3 pence-higher than the value of the Fortress transaction of 254 pence, indicating that investors expected a higher offer.

According to UK acquisition rules, CD&R must submit a firm offer before July 17.

The takeover committee has not announced a deadline for Apollo to clarify its intentions related to Morrison.

underestimated

The interest in Morrison underscores the growing interest of private funds in UK supermarket chains, which are considered attractive due to their cash generation and freehold assets. These funds believe that after the COVID-19 pandemic, the stock market did not recognize the value of grocery stores.

Morrison started his business as an egg and butter merchant in 1899. Now, its annual sales are second only to British market leaders Tesco (OTC:), Sainsbury’s and Asda.

Morrison owns 85% of its nearly 500 stores and owns 19 production bases that are mainly freehold. It is unique among British supermarkets, and the fresh food it produces accounts for more than half of its sales.

Last year, Apollo lost when it bought Asda to the brothers Zuber and Mohsin Issa and TDR Capital. The transaction valued Asda at 6.8 billion pounds.

Tesco and Sainsbury’s share prices rose by 1% and 1.4%, respectively, and the market speculates that they may also attract bids. Both companies declined to comment.

Apollo said that as of the end of March 2021, its private equity business managed more than $89 billion in assets, including 150 companies including Swiss watches, TMT Group Endemol Shine, and gaming companies. Ladbrokes (London:) Coral and Norwegian Cruise Line (NYSE:).

(1 USD = 0.7232 pounds)