Morrisons rejects US private equity deal

Morrisons has rejected a £5.5 billion takeover bid from New York based private equity firm Clayton, Dubilier & Rice (CD&R).

CD&R is no stranger to British retail deals; the group made £1 billion in 2018 from the sale of its stake in discount retailer B&M.

Morrisons turned down a conditional cash offer from CD&R of 230 pence per share, claiming the offer “significantly undervalued” the company.

The Bradford-based supermarket’s shares rose 30 per cent on the London Stock Exchange (LSE) following the news.

Sources reported by The Financial Times said CD&R will now wait to assess investor reaction and signs of any political pushback before deciding how to proceed.

The sources also said that Morrisons is “happy to continue as a plc” but that “every company is for sale at the right price”.

CD&R has until July 17 to make a firm offer.

The news comes after Morrisons saw profits slide by 50.7 per cent in 2020, following £290 million in pandemic-related costs.

However, the companies like-for-like sales, excluding fuel and VAT, were up by 8.6 per cent for the year.

The supermarket was removed from the FTSE 100 index of the LSE’s largest companies in March.

In addition to its 497 Morrisons stores, the supermarket also claims to be the UK’s second largest fresh food manufacturer, operating 18 food manufacture sites.

Private equity has a significant foothold in the UK supermarket industry; the private equity firm TDR Capital acquired Asda from Walmart in a £6.8 billion deal in partnership with the billionaire Issa brothers in October 2020.

The Asda deal underwent regulatory review from the Competition and Markets Authority (CMA) regarding its potential for anti-competitive outcomes.

“The board of Morrisons evaluated the conditional proposal together with its financial adviser, Rothschild & Co, and unanimously concluded that the conditional proposal significantly undervalued Morrisons and its future prospects,” said a Morrisons spokesperson. “Accordingly, the board rejected the conditional proposal on 17 June 2021.”

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