Fortress-led consortium increases Morrisons takeover bid to £6.7bn

The private equity-backed consortium vying to buy Morrisons has increased its bid for the supermarket chain to £6.7 billion amid speculation of a rival offer.

The consortium led by US private equity firm (and Majestic Wine owner) Fortress has increased its previous offer, which had been agreed by management at the Bradford-based retailer, by £400 million.

The bidder said it increased its offer amid "speculation regarding a possible counter-offer by Clayton, Dubilier & Rice” (CD&R), a rival US private equity firm that saw a £5.5bn approach rejected last month.

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UK takeover regulators had given CD&R a deadline of this Monday to either place its own firm bid for the chain or walk away.

Morrisons says its directors believe the increased Fortress offer is in the best interests of the supermarket's shareholders as a whole. Picture: Tolga Akmen/AFP via Getty Images.

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It also comes after a string of Morrisons' investors – including largest shareholder Silchester – said they would not back the original 254p per share offer agreed.

The latest deal will value the company at 272p per share, and shareholders will vote on the takeover offer at a general meeting on August 16.

The bidder said the offer represents a 52 per cent premium on the group's 178p per share price at the close before the first takeover proposal sparked a surge in its valuation.

"Morrisons directors believe that the increased Fortress offer is in the best interests of Morrisons shareholders as a whole, and accordingly unanimously recommend that Morrisons shareholders vote in favour of the resolutions required to implement the increased Fortress offer," the company said in a stock market statement.

The Fortress-backed consortium said at the end of the July that the UK competition watchdog had not raised any issues regarding its takeover proposal. It said it was told that the Competition and Markets Authority “has no further questions” regarding the offer, and the latter organisation has “not opened an inquiry or indicated in writing that it is still investigating whether to open an inquiry”.

Mooted

The mooted takeover of Morrisons – the UK’s fourth largest supermarket chain – comes after the collapse of Sainsbury’s mega-merger with Asda in 2019 after competition officials blocked the deal.

Morrisons, which can trace its roots back to 1899 when egg and butter merchant William Morrison opened a stall at Bradford Market, in 2004 opened its first store in Scotland – in Kilmarnock.

In a May trading update, the grocery major said total sales in the 14 weeks to May 9 grew 2.7 per cent on a like-for-like basis, excluding fuel, including a 113 per cent leap in online sales. The group also enjoyed strong growth in its wholesale division – up 21 per cent – thanks to a recently inked partnership with McColl’s convenience stores.

Sophie Lund-Yates, senior equity analyst at financial services group Hargreaves Lansdown, last month said: “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.”

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