Shoppers ‘to pay price’ as Morrisons sells out to US
Morrisons bid battle to boost ‘bargain’ UK grocers
MORRISONS customers, staff and suppliers could lose out after the supermarket’s board backed a fresh takeover bid from a group of controversial investors, critics fear.
The chain revealed at the weekend that it had received a second takeover bid, worth £6.3billion, from a consortium led by US private equity firm Fortress – and would recommend the offer to its shareholders.
The bidders have promised to be ‘good stewards’ of the popular British grocery business, vowing to keep the headquarters in Bradford and not to make any ‘material’ sales of its property.
But critics have questioned their intentions. Lord Sikka, a Labour peer and professor at essex Business School, said: ‘My concern is whether this is a good deal for consumers, employees and businesses in the supply chain. Private equity has a habit of only paying minimum wage and not offering any security to the supply chain.
‘Various firms have made promises in the past to protect British jobs, but we need practical steps. And for that, you need to involve employees in the sale process.’
Morrisons bosses are set for bumper payouts under the Fortress offer. Chief executive David Potts would earn £19million for the 3million shares he owns outright and 4.6million that he could receive under various company reward schemes.
Operating chief Trevor Strain could make £11million and finance boss Michael Gleeson more than £3million.
The new Fortress-led offer will also include Canadian pensions giant CPPIB and KReI, a division of Koch Industries, owned by billionaire Donald Trump ally Charles Koch. Fortress was founded in 1998 by partners including Wesley edens, a majority shareholder in Aston Villa football club.
Morrisons’ shareholders will now vote on the deal. It must be passed by more than 50 per cent of those who vote and together they must hold 75 per cent of the company. But top-ten shareholder, fund manager JO hambro, said last week that bidders should be offering 270p per share for Morrisons – well above Fortress’s bid of 254p.
Private equity firms buy companies and look to sell them on around five years later for a profit. But they are often criticised for their brutal tactics and short-term outlook.
Critics drew attention to the track record of Morrisons’ new bidders. Charles Koch and his late brother David sparked anger in 2010 after pumping more than £700,000 into a campaign to repeal California’s climate change laws. The family’s foundation, which invests in property, has also funded pushes to evict tenants from their homes during the pandemic.
Meanwhile, CPPIB refused to back an agreement between shopping centre business Intu and its lenders to give it breathing room on its debt last year.
The fears for Morrisons come amid a wave of takeover attempts for British businesses by private equity firms. Buyout companies unveiled 365 offers for companies between January and June – the most since records began in 1984 – leading to accusations of ‘pandemic plundering’ as they rush to snap up businesses on the cheap.
Last month, Morrisons rejected US giant Clayton Dubilier and Rice’s £5.5billion bid.
‘Involve employees in the sale process’
SUPERMARKET shares were set to rise on the London Stock Exchange today as a full-scale bidding war for Morrisons erupted over the weekend.
Tesco, Sainsbury’s and Marks & Spencer were poised to move higher after a fresh bid for Morrisons led by US private equity firm Fortress sparked a takeover battle that could rumble on all summer.
Fortress has teamed up with a division of Koch Industries, run by the billionaire Koch family which is one of the biggest donors to the US Republican party, and Canadian pension giant CPPIB to table a bid at 254p per share, valuing Morrisons at £6.3bn.
This was comfortably above the 230p per share offer made by Clayton Dubilier & Rice (CD&R) on June 18 – but fell short of the 270p which shareholder JO Hambro said last week that it would be willing to consider.
City brokers yesterday said the battle had only just begun, and rival bidders would have to raise their offers if they want to win. Apollo Global Management, which lost out in the race to buy Asda earlier this year, is also reported to be circling the grocer, while it is understood Lone Star is interested in the supermarket’s property assets.
The major question is whether the Fortress offer is enough to entice Morrisons’ largest shareholder, Silchester International Investors, to engage with the takeover. The 27-year-old firm, led by star fund manager Stephen Butt, is expected to be the kingmaker as it owns 15.2pc of Morrisons.
Silchester so far has remained quiet but it is rumoured the firm will not entertain anything below 280p. The Mail understands that Fortress has not yet entered into talks with shareholders.
Amid a wave of takeover bids for UK companies, which has led to accusations of ‘pandemic plundering’ on the part of private equity giants, shareholders have begun to speak out.
Andrew Koch, a senior fund manager at Legal and General Investment Management which is a top ten shareholder in Morrisons, said last month that CD&R’s bid ‘would not be adding any genuine value’.
Others have criticised company boards for capitulating too easily to ‘low-ball’ private equity offers.
Investors are also questioning whether other supermarket giants could be on the block.
Sainsbury’s, Marks & Spencer and Tesco have performed well during the pandemic but their share prices remain subdued.
‘These are good businesses with strong property portfolios. Why have analysts and investors taken so long to realise this? To private equity with the weak pound they are a bargain,’ the broker said.