U.K.’s leading supermarket chain Morrisons agree to takeover by Fortress Investment Group at £ 6.3 billion
Morrisons, the United Kingdom’s (U.K.’s) fourth largest supermarket chain has agreed to a takeover led by SoftBank owned Fortress Investment Group at £ 6.3 billion (U.S. $ 8.7 billion).
The Fortress offer, along with Canada Pension Plan Investment Board and Koch Real Estate Investments, exceeds a £ 5.52 billion unsolicited proposal from Clayton, Dubilier & Rice (CD&R), which Morrisons rejected last month. However, it was less than the £ 6.5 billion asked by top 10 Morrisons investor JO Hambro Capital Management (JOHCM).
Founded in 1899 by William Morrison, it began as an egg and butter stall in Rawson Market, Bradford, England. Until 2004, Morrisons store locations were primarily focused on North of England. But with the takeover of Safeway the same year, the company’s presence increased significantly in the South of England, Wales and Scotland. It now has 494 supermarkets across England, Wales and Scotland as well as 1 in Gibraltar. As of February 2021, Morrisons employed 110,000 employees and served around 11 million customers each week.
The shareholders of Morrisons now need to vote on the fortress offer, which gives them an enterprise value of £ 9.5 billion once its net debt of £ 3.2 billion is taken into account.
The Fortress deal underlines the growing appetite from private funds for British supermarket chains, which are seen as attractive because of their cash generation and freehold assets.
Speaking on the occasion, the Chairman of Morrisons – Andrew Higginson said, “We have looked very carefully at Fortress’ approach, their plans for the business and their overall suitability as an owner of a unique British food-maker and shopkeeper with over 110,000 colleagues and an important role in British food production and farming.”
He further said, “It’s clear to us that Fortress has a full understanding and appreciation of the fundamental character of Morrisons.”
The Managing Partner of Fortress investment Group – Joshua A. Pack said, “We are committed to being good stewards of Morrisons to best serve its stakeholder groups, and the wider British public, for the long term.”
There are speculations that other private equity groups and Amazon, which have a partnership deal with Morrisons, could enter the fray in a potential bidding war.
Post-acquisition, Fortress will retain Morrisons’ Bradford, Northern England, headquarters and its existing management team led by C.E.O. – David Potts and execute its existing strategy. Potts would sell his shares to Fortress for £ 9.2 million and the C.O.O. – Trevor Strain would sell his shares for £ 3.6 million. Under the terms of the deal, the shareholders and investors of Morrisons would receive 254 pence a share, 252 pence in cash and a 2 pence special cash dividend.
The initial offer from Fortress was received by Morrisons on May 4, 2021 at 220 pence a share. This offer was not made public. Fortress then made four subsequent proposals before it offered a total value of 254 a share.
