Green light for private equity swoop on Morrisons

As CMA admits it cannot challenge £6.3bn deal . . .

Fortress’s £6.3bn takeover of Morrisons moved a step closer after the competition watchdog cleared the path for the deal.

the private equity-led consortium yesterday revealed the Competition and Markets Authority (CMA) had confirmed it will not intervene if shareholders vote its 254p-per-share offer through next month.

the supermarket’s board has already backed Fortress’s bid, meaning shareholders are now the last line of defence against the controversial takeover.

the CMA had been urged by MPs to intervene but the watchdog’s chief Andrea Coscelli warned the body did not have the powers to step in.

In a letter to the business select committee, Coscelli raised concerns about private equity takeovers, in particular job losses and the prospect of lower taxes for the treasury.

But he added that there was no proof that the Morrisons deal was highly leveraged and would therefore collapse or that it would be detrimental to competition in the UK.

Fortress’s only other UK retail asset is Majestic Wines, which has 190 UK stores.

Coscelli, chief executive of the watchdog since 2016, said: ‘Private equity acquisitions can be highly leveraged, which can make the target companies more vulnerable to failure.’

But he added: ‘the CMA would need to show that the levels of debt being taken on as a result of the acquisition are such that the target would be likely to fail post merger, or at least that its financial position would be affected to such a degree that it would become a significantly weaker competitor.’

Darren Jones, chairman of the business select committee, said Coscelli’s response suggested that ‘questions remain for government about whether the right regulatory checks and balances are in place to ensure consumers, workers and pensioners are protected in the most significant takeovers’. Ministers have the power to intervene on the basis of national security, media plurality, stability of the UK financial system, and to prevent public health emergencies – but it is rare that they use these powers.

Morrisons looks more vulnerable than ever but there is hope that shareholders could yet step in and save the day by voting against the deal.

this week five investors, which together hold 22pc of Morrisons’ shares, publicly denounced the bid putting a successful takeover into greater doubt.

Legal & General, the eighthlargest investor in the company, has warned the supermarket chain should not be taken private for the ‘wrong reasons’.

While silchester, the group’s largest shareholder, also said ‘there is little in the offer that could not be achieved by Morrisons as a listed company’.

the consortium led by Fortress must win the support of 75pc of shareholders to take control of the supermarket.

Analysts have suggested 270p to 280p may be enough to clinch the deal, although prices of up to 314p, or £7.8bn, have been mooted.

Both CD&r and Fortress, whose backers include the singaporean sovereign wealth fund, are believed to have ample firepower to raise their bid if required, but are weighing up how much they need to offer.

Morrisons shares climbed again yesterday, by 1.1pc, or 3p, to 267.6p, suggesting the market expected that Fortress, or rival private equity bidder Clayton Dubilier & rice (CD&r), would offer a higher price.