Shares in Morrisons (MRW) jumped 4% to 291p in trading on Friday after the board accepted an improved 285p per share offer from US private equity firm Clayton, Dublier & Rice.
The previous offer was pitched at 230p a share. It had been rejected because the board felt it ‘significantly undervalued’ the UK’s fourth largest supermarket.
CD&R’s new offer trumps an alternative 270p a share bid from another consortium, led by US private equity firm Fortress, the investor behind Majestic Wines.
Morrisons’ board has now unanimously withdrawn its recommendation for the Fortress bid. That the shares today edged slightly above the CD&R bid suggests some hope that Fortress could yet come back with a higher offer, although that appears doubtful.
WHY BUY MORRISONS
The supermarket chain has pulled in potential buyers because of its large property estate (it owns 90% of its 500 stores), large cash flows and a debt-free balance sheet.
It also runs a surplus on its pension scheme, often a poison pill to corporate takeovers.
Yet this remains a hugely competitive market dominated by Tesco (TSCO) and Sainsbury (SBRY), and being aggressively attacked by German privately-owned pair Lidl and Aldi.
The pandemic has forced food retailers to increase capital expenditure in response to the increasing shift to online shopping and making stores feel safe for customers and staff.
