CD&R triumphs at £ 10bn battle of Morrisons

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US private equity group Clayton, Dubilier and Rice triumphed in the four-month takeover battle for Wm Morrison with an offer of £ 9.97 billion, including debt from the UK’s fourth-largest supermarket.

The grocer’s fate, which was founded in 1899 and has been publicly traded since 1967, was sealed in an auction process on Saturday, overseen by the UK procurement regulator.

The winning bid of 287 pence a share was 2 pence a share above the existing CD & R bid and just one penny above the 286 pence offered by a consortium led by SoftBank-owned Fortress Investment. His offer represented a business value of £ 9.95 billion.

Joshua Pack, managing partner at Fortress, said Morrisons was “an outstanding business” and wished him and his new owners “the best for the future.”

He added that the UK “remains a very attractive investment environment from many perspectives” and vowed to continue exploring opportunities there.

CD&R is paying a 61 percent premium to Morrisons share price before the saga began, while the total value of the transaction is 11.8 times the group’s underlying profit for the year through January 2021.

The grocer’s directors are expected to meet later today to decide which offer to recommend, though this is largely a formality. Investors in the group will be asked to approve the deal at a special meeting on October 19.

At least three-quarters of voters must approve the transaction for it to proceed. Some shareholders had expressed concern earlier in the process on the structure of the transaction and the price, but I haven’t commented since.

The battle for Morrisons began behind the scenes in the spring and was made public in early June, when the company confirmed that it had turned down 230p per share CD&R approach.

For much of the summer, Fortress seemed to have the upper hand, securing a board recommendation for an offer of 254 pence per share and then increasing to 270p to avoid a counter offer.

But CD&R responded in August, presenting a higher than expected 285 pence a share offering and persuade group directors to change their recommendation. Too An agreement was reached strengthen the group’s two defined benefit pension plans by transferring additional properties to them.

Then the Acquisition Panel intervened, reaching an agreement between all parties to conclude the bidding war. using an auction process performed in up to five rounds in a single day.

Both bidders are committed to retaining the group’s existing management team, many of whom worked with CD&R advisor Sir Terry Leahy when he was CEO of rival Tesco, and upholding the legacy of Sir Ken Morrison, the son of founder of the group that transformed him into a national player.

But given how high the bid has gone up, analysts believe any of the bidders will have to make significant disposals of assets and cost savings to generate a reasonable return on your investment.

The transaction, which if approved will be completed by the end of October, culminates a period of notable turmoil in the highly competitive UK supermarket sector.

In the context of a global pandemic that has tested their operational capabilities to the limit, two of the four largest grocery stores with a quarter of the market between them will have changed hands.

In February, Asda, the third-largest supermarket, was sold to a Blackburn-based consortium of TDR Capital and the Issa brothers.

There has also been speculation about the fate of the second largest trader, J Sainsbury, where the Qatar Investment Authority and Czech billionaire Daniel Kretinsky are major shareholders.

The Morrisons marathon will generate a bonanza for investment banks, attorneys and public relations advisers in the City; According to plan documents from both parties, Morrisons will spend around £ 56 million on financial and legal advice, while the CD & R bill is expected to reach around £ 63 million. Fortress expects to spend £ 53 million.

CD&R will now spend millions more to organize a billion-pound debt package to help finance the acquisition.

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