Apollo enters takeover battle for Morrisons
LONDON: The $8.7 billion bid battle for Britain’s Morrisons intensified yesterday when a third private equity group entered the fray, sending the supermarket group’s share price racing ahead of the value of an offer it recommended on Saturday.
New York-headquartered Apollo Global Management, which last year missed out on buying Morrisons rival Asda, said it was in the preliminary stages of evaluating a possible offer but had not approached its board.
Private equity groups have embarked on a spending spree on assets around the world in the last six months, flush with cash after they largely sat out the pandemic. Morrisons, set up 122 years ago as a market stall in northern England, is a target.
Morrisons said on Saturday that its board, led by chairman Andrew Higginson, had recommended a takeover led by SoftBank Group Corp-owned Fortress Investment Group that valued the grocer at £6.3 billion ($8.7 billion).
The offer from Fortress, along with Canada Pension Plan Investment Board and Koch Real Estate Investments, exceeded a £5.52 billion unsolicited proposal from Clayton, Dubilier & Rice (CD&R), which Morrisons rejected on June 19.
However, it was less than the £6.5 billion asked for by top 10 Morrisons investor JO Hambro last week.
Fortress’ offer gives Morrisons an enterprise value of £9.5 billion when including net debt of £3.2 billion.
Its shares were up 11.2% at 267 pence at 0935 GMT — ahead of the 254 pence value of the Fortress deal, indicating investors expect higher offers to be made.
Morrisons declined to comment on Apollo’s statement.
Analysts have speculated that other private equity groups and Amazon.com Inc, which has a longstanding supplier deal with Morrisons, could also bid. Amazon has declined to comment. While Britain has always been a key destination in Europe for private equity investments, the volumes have peaked this year as Brexit and sterling weakness coupled with the coronavirus crisis to hit company valuations.
Like its peers Tesco, Sainsbury’s and Asda, Morrisons enjoyed a surge in sales in the last 18 months, as hospitality was forced to shut, but the cost of ramping up online delivery hit profits.
Ultimately, its fate will be decided by its shareholders.
As things currently stand there is only one firm bid on the table and investors will vote on the Fortress deal.
Morrisons’ three biggest investors Silchester, Blackrock and Columbia Threadneedle, which Refinitiv data showed having stakes of 15.2%, 9.6% and 9.4% respectively, are effectively the kingmakers. None has commented so far.
Under UK takeover rules Fortress’ offer effectively resets the clock for
CD&R to clarify its intentions, with a previous date of July 17 extended to around the end of the month.
The Takeover Panel is yet to announce the deadline by which Apollo must clarify its intentions.
Morrisons owns 85% of its nearly 500 stores and has 19 mostly freehold manufacturing sites. It is unique among British supermarkets in making over half of the fresh food it sells.