American private equity group Clayton, Dubilier, and Rice has emerged as a winner in the long battle to takeover WM Morrison Supermarket Plc. The battle to take over Britain’s fourth-largest supermarket went for almost four months. New York-based CD&R defeated private equity rival Fortress Investment Group. Commenting on the bid, Morrison chairman Andrew Higginson that final offer of 287 pence a share is an excellent value for shareholders. “At the same, the final offer is good enough to protect the fundamental character of Morrisons for all stakeholders,” Higginson said. Clayton, Dubilier, and Rice win the bid by offering 1 pence a share more than what was offered by Fortress. Also, it was 2 pence a share more than CD&R’s existing offer. The auction was run by the Takeover Panel that is responsible for overseeing acquisitions in the United Kingdom. The winning bid offered by CD&R is around 61 percent premium to the grocer’s share price before the news about the takeover interest was revealed. The stock of Morrison closed at 297 pence suggesting that it could cross the mark of 3-pound. With CD&R winning the bid, the path for the biggest take-private deal in the United Kingdom in more than a decade has been cleared. It is pertinent to mention that the company was founded in 1899. Morrisons is a publicly traded company since 1967.
Joshua Pack, a managing partner at SoftBank-owned Fortress Investment, wished Morrisons and its new owners the best for the future. “Morrisons is an outstanding business and I would like to wish the grocer as well as its new owners the very best for the future,” Pack added that Britain has one of the best attractive investment environments and Fortress would continue to explore opportunities in the country in the coming days. The total value of the deal offered by CD&R is around 11.8 times more than the total profit of the group for the year to January 2021. This was before adjusting for the reimbursement of a government business rates holiday. The grocer witnessed intense buyout activity for the past couple of months. Bidders showed their interest in a well-run and highly cash-generative business. Morrison has a strong real estate portfolio with almost 500 stores across the United Kingdom. Morrisons’ board has unanimously recommended the revised offer. However, shareholders will have the final say. They are expected to meet on October 19 to vote on the deal. If the transaction is approved by the investors, it will mark the end for the grocer’s more than half a century in the public market. The company was founded by William Morrison as an egg-and-butter stall in Bradford and has now grown to around 500 stores.
Sir Terry Leahy, a former chief executive officer of Tesco Plc and a senior adviser to CD&R, said that the firm is looking forward to approval for the deal by the shareholder. Three-quarters of shareholders voting for the deal must approve the transaction in order to officially give a green signal to the deal. It is pertinent to mention that Tesco is the largest grocer in Britain. “The firm is gratified by the recommendation. We have a strong belief that the firm is an excellent business. It has a strong management team with a clear strategy and good prospects.” The deal also marks the return of Leahy to Morrisons. He has been with most of the management team of Morrisons, including chairman Higginson and chief executive officer David Potts. Both Higginson and Potts have spent a considerable amount of time at Tesco. Leahy is likely to be the next chairman. Behind the scenes battle for Morrisons started in the spring and came to light with the supermarket rejected the offer of CD&R. At that time Morrisons had rejected the 230 pence approach from the American equity group. Since then, both the firms made multiple offers and for much of the summer, Fortress apparently had the upper hand. Fortress even managed to secure a recommendation from the board for 254 pence a share bid and later increased it 270 pence. But CD&R struck and offered a higher-than-expected offer. The group managed to persuade the board to switch their recommendation. It has also agreed to retain the existing management team of Morrisons.