Morrisons jumps after rejecting $ 7.6 billion in private equity bids

File Photo: Photo of Morrisons store in St Albans, UK, September 10, 2020.Reuters / Peter Chibora

June 21, 2021

James Davy

London (Reuters)-Morrisons shares 35 on Monday, hoping that US private-equity fund Clayton, Duville & Rice (CD & R) will raise offers to UK supermarket groups or wipe out other bidders % Soared.

The UK’s fourth-largest grocery store, after Tesco, Sainsbury’s and Asda, has rejected the £ 5.52 billion ($ 7.62 billion) cash offer offered by CD & R, said Saturday.

The Surprise Approach underscores the growing demand for private equity in UK supermarkets and is fascinated by its stable cash generation and free-holding real estate assets.

Morrisons owns 85% of its approximately 500 stores, most of which have free-owned manufacturing sites. It is unique among British supermarkets in that it manufactures more than half of the fresh food it sells.

CD & R’s 230p per share offer includes £ 3.17bn net debt, gives Morrisons £ 8.7bn in corporate value, and says the group and its outlook are “significantly undervalued.” That is.

Morrisons shares closed at 61.8p at 235p on the first day of trading after an offer made at a premium of 29% of the closing price on Friday was announced.

“This sector generally seems to be undervalued. Private equity seems to be interested in Morrisons. This is to generate cash for Morrisons to repay themselves.” “There are a lot of freehold assets to sell and leaseback,” said Andrew Koch, senior fund manager. Active stocks of Legal & General Investment Management (LGIM) talked about the move.

“It doesn’t add real value and companies can do it themselves, so I personally don’t expect successful bids at that level,” LGIM said. Koch added. This shows that Refinitiv data holds a 1.58% stake in Morrisons.

Analysts said they expect CD & R to assess investor reaction before deciding what to do next.

Under UK takeover rules, CD & R, with former Tesco boss Terry Leahy as senior adviser, must announce a solid proposal or leave by July 17.

According to analysts, stock prices of rivals Tesco, Sainsbury’s and Marks & Spencer have risen 3.2%, 5.7% and 4.1%, respectively, hoping that the entire sector is functioning.

Two major Morrisons investors, Silchester and Columbia Threadneedle, have shown that Refinitiv data holds 15% and 7.4% stakes, respectively, both declined to comment.

In addition to the possibility of other private-equity players participating in the battle, there has long been speculation that the giant US Amazon, which has a partnership agreement with Morrisons, could emerge as a bid candidate.

Amazon declined to comment.

Morrisons, with a staff of 118,000, is one of Britain’s largest private sector employers, and the UK opposition Labor Party warned on Sunday that the acquisition of private equity could endanger jobs.

A spokesperson for Prime Minister Boris Johnson declined to comment on the situation, but union Usdo, who represents Morrisons staff, did not comment.

Supermarket sweep

Industry executives and some sector analysts believe that the stock market is unaware of the inherent value of the UK-listed supermarket group.

They argue that if the stock market doesn’t value them properly, the acquirer will.

“Investors want a very alternative story about minimizing capital spending and becoming an automated teller machine,” a senior supermarket executive told Reuters. It was.

Executives said even Tesco, which has a stock market value of £ 17.3 billion, could be approached.

Zuber and Mohsin Issa, in collaboration with private equity firm TDR Capital, bought a majority stake in Asda from Wal-Mart in a deal valuing the group at £ 6.8bn.

The deal closed in February, after Sainsbury’s acquisition of Asda was blocked by competition regulators in 2019.

In April, Czech billionaire Daniel Cretinsky raised its stake in Sainsbury’s to nearly 10%, igniting bid speculation.

($ 1 = 0.7243 lbs)

(Report by James Davey, additional report by Simon Jessop, Thyagaraju Adinarayan, Elizabeth Piper, edited by David Goodman, David Evans, Alexander Smith)

Morrisons jumps after rejecting $ 7.6 billion in private equity bids

Source link Morrisons jumps after rejecting $ 7.6 billion in private equity bids

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