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Factbox-The $9 billion battle for Britain’s Morrisons

imageStock Markets50 minutes ago (Jul 05, 2021 09:00AM ET)

(C) Reuters. A customer carries a shopping bag outside a Morrisons supermarket in New Brighton, Britain, July 5, 2021. REUTERS/Phil Noble

By James Davey

LONDON (Reuters) – An $8.7 billion bid battle for Britain’s Morrisons heated up on Monday when a third private equity group entered the fray and the supermarket group’s share price raced ahead of the value of an offer it recommended on Saturday.

Following are some details about the suitors of the 122-year-old Bradford, northern England, based grocer, which is Britain’s fourth largest.

FORTRESS INVESTMENT GROUP LED CONSORTIUM

On Saturday, the 500-store Morrisons agreed a 6.3 billion pound ($8.72 billion) takeover led by the SoftBank owned Fortress and backed by Canada Pension Plan Investment Board and Koch Real Estate Investments.

The consortium, which Morrisons had secretly been talking to since May 4, has pledged to maintain the group’s Bradford headquarters and its existing management team led by CEO David Potts and execute its existing strategy. It said material store sale and leaseback transactions were not planned.

That could prove more attractive to the British government after the opposition Labour party started to voice concern over the impact on jobs and food manufacturing after the pandemic brought home the need to keep it local.

Fortress bought British wine seller Majestic Wine for 95 million pounds in 2019.

CLAYTON, DUBILIER & RICE (CD&R)

The U.S. private equity group revealed on June 19 that it was considering a cash offer for Morrisons. Morrisons said CD&R’s 5.52 billion pound proposal was made on June 14 and rejected on June 17.

Terry Leahy, the former boss of Britain’s market leader Tesco (OTC:TSCDY), is a senior adviser to CD&R.

CD&R has not detailed its plans for Morrisons. However, there has been speculation that CD&R wants to sell and lease back some stores and open Morrisons convenience stores at the Motor Fuels Group petrol forecourt chain it owns.

CD&R is yet to clarify its intentions.

APOLLO GLOBAL MANAGEMENT

Apollo, another U.S. private equity group, said on Monday it was in the preliminary stages of evaluating a possible offer for Morrisons but said no approach has been made to its board.

Apollo has shown itself to be keen on UK supermarket assets as it chased Asda, Britain’s No. 3 grocer, last year before losing out to brothers Zuber and Mohsin Issa and TDR Capital, which bought a majority stake from Walmart (NYSE:WMT) in a 6.8 billion pound deal.

OTHER POSSIBLE BIDDERS?

Analysts have speculated that other private equity players could join in, noting that Lone Star was also interested in Asda before pulling out.

U.S. giant Amazon (NASDAQ:AMZN), with whom Morrisons has a longstanding supplier partnership deal, has also been talked about as a possible bidder to secure a major physical presence in Britain’s food retail market, one of the most advanced in online delivery.

Competition rules would preclude any one of market leader Tesco, No. 2 Sainsbury’s or Asda taking over Morrisons.

Britain’s competition regulator blocked Sainsbury’s agreed takeover of Asda in 2019.

WHAT HAPPENS NEXT?

As things stand Fortress’ recommended offer is the only firm offer on the table.

A circular detailing Fortress’ offer must go to shareholders within 28 days of last Saturday (July 3). Then not less than 14 days after that Morrisons has to convene a meeting of shareholders so they can vote on the offer.

Although Morrisons’ directors have committed to vote in favour of the Fortress proposal, it doesn’t commit other shareholders from doing the same and the board has a fiduciary duty to consider any other offers.

($1 = 0.7222 pounds)

Factbox-The $9 billion battle for Britain’s Morrisons