Potential further Morrisons takeover offer sparks bidding war predictions

A third private equity company has said it is eyeing a takeover move for Morrisons, furthering speculation that there could be a dramatic bidding war for the supermarket.

Investment giant Apollo has announced that it is considering launching its own bid after the Bradford-based retailer agreed a £6.3 billion private equity takeover offer on Saturday.

New-York based asset manager Apollo Global Management confirmed that it is "in the preliminary stages of evaluating a possible offer for Morrisons on behalf of investment firms it manages.

It added that no formal approach has yet been made to the board of the food retailer. However, the update will spark speculation that shareholders could see a bidding war for the supermarket group.

It has even been suggested that Amazon could join a bidding war for Morrisons. Picture: Tolga Akmen/AFP via Getty Images.

The interest from Apollo comes two days after Morrisons told investors it had agreed a £6.3bn bid from a consortium of investment groups.

The offer, led by Softbank-owned Fortress – which has partnered with Canada Pension Plan Investment Board and Koch Real Estate Investments – will see shareholders receive 252p per share plus a 2p special dividend.

The agreement came almost two weeks after private equity firm Clayton, Dubilier & Rice (CD&R) made an approach last month.

Apollo has now said: "There can be no certainty that any offer will be made, nor as to the terms on which any such offer might be made."

It is understood that Apollo hired investment bank Morgan Stanley to advise on any potential offer.

Listed convenience store chain McColl's told investors that its supply contract with Morrisons would not be affected by any potential change in the retailer's ownership. In February, McColl's extended its wholesale supply contract by a further three years to January 2027.

"McColl's looks forward to continuing to build on the strong relationship developed with Morrisons over the years to serve our local neighbourhood communities with a high quality convenience offer," it said.

Bargain

Neil Wilson, chief market analyst for Markets.com, believes “there could well be another offer or two” for the supermarket. “Given our interventionist chancellor wants to open up the listing process to make it more appealing to list in London, he may also want to consider ways to shore up the defences of public companies. When you look at UK valuations vs US, and even European peers, it’s still too cheap.”

Echoing this sentiment was Richard Hunter, head of markets at Interactive Investor. He said: “As an investment destination, the UK is attracting increased interest from overseas – and the latest twist in the Morrisons bidding war has upped the ante.

“It is perfectly feasible, however, that this is not yet the end game. UK supermarkets in general are cash-generating engines, whose share price gains have been capped by the costs of the pandemic, despite increased sales, making them more attractive on valuation metrics. In addition, Morrisons largely owns its freehold estate, adding another sweetener to any potential purchase.

“Quite apart from the possibility of a revised offer from CD&R, Apollo Global Management have confirmed that they are also considering an approach, having recently missed out on a deal to buy Asda. This could lead to a three-way bidding war, with some speculation that following on from its business relationship with Morrisons, Amazon could even emerge from left field as a surprise last-minute entrant.”

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