Morrisons said it had been sent an “unsolicited, highly conditional, non-binding proposal” from Clayton, Dubilier & Rice, a New York-based private equity firm. It rejected the offer after the board “unanimously concluded that the conditional proposal significantly undervalued Morrisons and its future prospects”.
But it appears that investors think CD&R might return with a higher bid after a Monday morning surge in Morrisons’ share price.
Any deal for Morrisons or any other UK supermarkets would follow the £6.8 billion buyout of Asda involving the billionaire Issa brothers, which was approved by the competition watchdog last week.
Richard Hunter, head of markets at interactive investor, said: “The UK market has increasingly been a source of interest this year from overseas investors on valuation grounds. This was further evidenced by a £5.5bn approach for William Morrison from US private equity firm Clayton Dubilier & Rice.
“The approach has initially been rejected by Morrisons as significantly undervaluing the company. The shares had previously fallen by 9 per cent over the last year, contrary to the general market direction, and leading to relegation from the FTSE100 in March.
“Even so, the approach could stimulate some froth in the sector and even shake out other companies who are currently running the slide rule over UK plc.”
Independent retail analyst Nick Bubb said: “CD&R aren’t going away and we suspect a deal can be done in the 250p-260p area.”