By Scott Wright
WM Morrison has agreed to an improved to takeover offer from a US consortium led by Fortress Investment Group, valuing the supermarket chain at £6.7 billion.
Softbank-owned Fortress increased its offer to fend off a possible counter-offer by New York-based Clayton, Dubilier & Rice (CD&R), which effectively opened the bidding war for Morrisons with its initial approach at the start of last month. That offer, which was rejected by the Morrisons board, valued the group at £5.5bn.
The new all-cash offer from Fortress, which is bidding for Morrisons alongside consortium partners Canada Pension Plan Investment Board and Koch Real Estate Investments, is worth 272p per share. This comprises an increased cash consideration of 270p for each Morrisons share and a special dividend of 2p per share.
The original offer from the Fortress-led consortium valued Morrisons at £6.3bn, which comprised 252p per share plus a special dividend of 2p.
The renewed offer came after major Morrisons’ biggest investor Silchester, which holds a 15.1 per cent stake, said last week that the original Fortress offer was too low. Its stance was subsequently echoed by M&G.
Another investor, Legal & General, had reportedly expressed concern that prospective private equity buyers would load Morrisons with debt, cut costs and take advantage of its freehold property empire. Morrisons owns a large proportion of its portfolio of nearly 500 stores.
In a statement, Fortress said the new offer does not change its “intentions as regards the business of Morrisons (including locations of its operations), the management of employees of Morrisons, existing employment and pension rights and the proposals in respect of the Morrison Share Plans”. In unanimously recommending the improved offer, the Morrisons directors declared that it was “in the best interests of the Morrisons shareholders taken as a whole.”
Shareholders will be asked to vote on the proposal on August 16.
Laura Hoy at Hargreaves Lansdown, said the offer “promises to keep Morrisons’ existing strategy in place and refrain from closing stores—a rarity in the world of private equity takeovers, and may assuage concerns among staff and the wider communities where the company operates.”
Shares in Morrisons closed up 6.14p at 278.14p.
She added: “The deal is signed, sealed, but not yet delivered. CD&R can still come back with a better offer—the group’s deadline is August 9. It will also have to be passed by shareholders, who are due to vote on the proposed takeover on 16 August.”
Ms Hoy added: “The deal is signed, sealed, but not yet delivered. CD&R can still come back with a better offer—the group’s deadline is August 9. It will also have to be passed by shareholders, who are due to vote on the proposed takeover on 16 August.”
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