Morrisons: US private equity firm wins £7bn auction for UK supermarket

By Jessica On Oct 2, 2021

A US private equity firm has won the auction for British supermarket group Morrisons with a £7bn bid.

Clayton, Dubilier & Rice (CD&R) bid 287 pence per share.

Morrisons is Britain’s fourth-biggest supermarket by market share, after market leader Tesco, Sainsbury’s and Asda.

Based in Bradford, the business began as an egg and butter merchant in 1899.

The battle for Morrisons is the most high-profile among a spate of bids for British companies this year, reflecting private equity’s appetite for cash-generating assets.

The Takeover Panel, which governs the process for M&A deals in Britain, moved to an auction because neither bidder had declared their offers final.

The panel said the US firm outbid a consortium led by the Softbank owned Fortress Investment Group, which had offered 286 pence.

Morrisons’ board, due to meet later, is now expected to recommend that shareholders accept the new offer at their meeting on 19 October.

If shareholders approve the offer, CD&R could complete its takeover of Morrisons by the end of the month.

CD&R’s bid team is spearheaded by former Tesco chief executive Sir Terry Leahy.

Analysis by Mark Kleinman, City editor

For millions of Morrisons customers across Britain, the news that an American private equity firm has won a hotly contested auction of the UK’s fourth-biggest grocer will mean little at a time when they are struggling to fuel their cars and facing warnings of Christmas shortages of their favourite products.

Yet the news on Saturday that Clayton, Dubilier & Rice – whose interest in buying the 122 year-old chain was revealed by Sky News in June – had triumphed over a consortium led by Fortress Investment Group, another US-based investor, is significant. At about £7bn – or just under £10bn, including Morrisons’ debt – analysts agree that CD&R is paying a full price for the business.

While it has already made a series of commitments to the supermarket giant’s employees and pension trustees, there will be enormous scrutiny of CD&R’s actions once the takeover is completed.

The presence of Sir Terry Leahy, the former Tesco chief who is expected to become Morrisons’ chairman and arguably the single-most successful figure in British retailing during the last 25 years, may reassure many onlookers.

With Tesco now performing strongly again, Asda under new ownership and discounters Aldi and Lidl hungry to gain further market share, consumers can expect a privately owned Morrisons to act boldly in order to make CD&R’s investment pay dividends.

Joshua A. Pack, managing partner of Fortress, said: “Morrisons is an outstanding business and we wish the company and all those involved with it the very best for the future.

“The UK remains a very attractive investment environment from many perspectives, and we will continue to explore opportunities to help strong management teams grow their businesses and create long-term value.”

Last month, Morrisons reported a 43% slump in half-year profits after COVID-19 costs took their toll and warned of price rises and product shortages amid current strains on supply chains.

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