Morrisons suitor teams up with private equity rival in multi-billion-pound bid move: reaction

Private equity firm Apollo Asset Management, which confirmed it was considering a bid for Morrisons earlier this month, will no longer be making an offer for the supermarket chain.

Morrisons is the fourth largest player in a UK supermarket sector that has recently seen the takeover of Asda, which had been owned by US retail giant Walmart. Picture: Mikael Buck/Morrisons

Instead, Apollo announced that it was in early discussions with rival private equity outfit Fortress to team up and become part of its consortium to buy the grocery major.

Fortress is owned by Softbank and made a £6.3 billion offer for the chain, which was accepted by the board, and is part of a consortium which also includes the Canada Pension Plan Investment Board and Koch Real Estate Investments, the vehicle of the US billionaire Charles Koch.

Apollo said the talks “may result in funds managed or advised by Apollo forming part of the investment group led by Fortress for the purposes of the Fortress offer.

“As a consequence of these discussions, Apollo confirms that it does not intend to make an offer for Morrisons other than as part of the Fortress offer.”

It added: “Apollo notes Fortress’s intentions regarding the Morrisons business and all its stakeholders, as set out in the announcement of the Fortress offer... Should these discussions lead to any transaction, Apollo would be fully supportive of Fortress’s stated intentions regarding Morrisons.”

The takeover battle for the supermarket business – the UK’s fourth largest behind Tesco, Sainsbury’s and Asda – started last month when New York private equity firm Clayton, Dubilier & Rice (CD&R) made a proposed £5.5bn bid, though this was rejected.

Asda was recently acquired in a bumper £6.8bn takeover by forecourt tycoons the Issa brothers and private equity firm TDR Capital.

Sophie Lund-Yates, senior equity analyst at financial services group Hargreaves Lansdown, said: “Apollo is laying down its weapons and potentially joining forces with the Fortress-led syndicate.

“From a shareholder perspective this is disappointing, because it takes the heat out of a potential bidding war, meaning the cash offer already on the table is less likely to get pushed upwards.

“Morrisons is a mixed bag of challenges and opportunities. Its online business is smaller than rivals, meaning Covid hit particularly hard. As more of a value option, it’s also more at risk from competition from the German discounters. The flipside to that is that the dented share price caused by Covid woes made the group a more attractive takeover target.”

A message from the Editor:

Thank you for reading this article. We’re more reliant on your support than ever as the shift in consumer habits brought about by coronavirus impacts our advertisers. If you haven’t already, please consider supporting our trusted, fact-checked journalism by taking out a digital subscription: www.scotsman.com/subscriptions