Morrisons shares jump more than 30% as it rejects £ 5.5bn offer

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Morrisons shares jumped more than 30% on Monday, after the supermarket giant rejected a £ 5.5bn takeover bid from a US private equity firm, potentially sparking a bidding war .

Investor demand was boosted by the announcement over the weekend that Morrisons, which employs around 120,000 people in the UK, had become a takeover target, making the Bradford-based chain the first riser in the industry. FTSE 250 Monday morning, the first opportunity to trade shares after the approach was made public.

Shares rose across the rest of the sector, with traders betting other supermarket groups could become targets for private equity. Sainsbury’s and Ocado were up 3.5% making them the top 100 FTSE stocks. Tesco shares were up 1.3% and Marks & Spencer up 3%.

However, Labor has raised concerns over the prospect of further private capital takeovers of UK companies, saying companies tend to dive and pocket dividends, while cutting jobs and leaving over-indebted companies. Reports suggest the Morrisons board would seek assurance from any potential buyers that their workers, manufacturing operations and pension plan would be protected.

Morrisons said on Saturday it rejected a preliminary offer from US buyout firm Clayton, Dubilier & Rice because it “significantly undervalues ​​Morrisons and its future prospects.” CD&R had offered to pay 230p a share in cash. Morrisons’ share price closed at 178.45 pence on Friday, but rose to 235 pence on Monday morning, valuing the company at £ 5.7 billion.

The private equity firm has until mid-July to make another offer or back out, which means it could file a more lucrative bid to convince Morrisons bosses to recommend investors sell the business . CD&R has Sir Terry Leahy, the former CEO of Tesco, as its senior advisor.

Analysts are speculating that other bidders, including rival private equity firms or the big retailer Amazon, could put their hats in the ring and start a bidding war for the UK’s fourth-largest grocer.

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Michael Hewson, chief market analyst at CMC Markets UK, said Morrisons’ surprise offer would give the entire industry a boost. Supermarket stock prices have struggled despite the success of companies throughout the pandemic.

“Compared to companies like the US food distribution industry, the industry’s share price performance has been dismal despite its profitability and dividend yields of around 4%. Maybe that is about to change, ”he said.

Analysts said bidders were interested in Morrisons in part because of the size of its online shopping and grocery delivery arm, which saw a 113% increase in online sales in the first quarter. “It is being supported because, despite this expansion, its online business is smaller than that of its competitors, which leaves more room for exceptional growth,” said Susannah Streeter, senior analyst at investments and markets at Hargreaves Lansdown.

Quick guide

Offers for UK private equity firms since the start of the Covid crisis


US private equity group Clayton, Dubilier & Rice’s unsolicited – and quickly rejected – takeover approach for supermarket chain Morrisons is the latest in a wave of offers for UK private equity firms since the start of the pandemic.

Billionaire brothers Mohsin and Zuber Issa have acquired a controlling stake in the supermarket chain from TDR Capital, in a £ 6.8 billion LBO.

UDG Health

Pharmaceuticals services group FTSE 250 accepted a £ 2.6 billion takeover offer from Clayton, Dubilier & Rice in May.

LV =

The life insurer initially known as Liverpool Victoria has agreed to sell itself to Bain Capital in a £ 530million deal.

Vectura Group

The British inhaled-focused pharmaceutical company agreed to a £ 958million takeover by global investment firm Carlyle Group in May.

Jean Laing

In May, KKR agreed to buy the UK infrastructure investor in a deal valued at around £ 2 billion.


The real estate investment and development group has agreed to be taken over by Blackstone in a £ 1.2 billion deal.

McCarthy & Pierre

The nursing home specialist has accepted an offer to buy back around £ 650million from Lone Star in 2020.


CD&R finalized the £ 308million acquisition of the plumbing and heating business in February.


The roadside assistance group has accepted a £ 219million takeover offer from TowerBrook and Warburg Pincus, who have also agreed to invest £ 380million in its large pile of debt.


The electrical equipment supplier accepted a £ 2.3 billion takeover bid from I Squared Capital and TDR Capital in March.

Bourne Leisure

Even Butlins was caught in the private equity frenzy, with Blackstone acquiring its owner, Bourne Leisure, earlier this year.

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Morrisons also owns most of its stores, which means a new owner could save money by selling or renting the sites, Streeter added. The grocer is full owner of 85% of its 497 stores and is proud of its 19 manufacturing sites, including bakeries, slaughterhouses, fishing fleets and egg farms.

However, Streeter warned that the appetite for supermarket buyouts could be short-lived as foreclosure-weary shoppers opt for restaurant meals and demand for groceries begins to wane. “As buyers fill fewer baskets, there is likely to be new price competition that could eat into margins at a time when continued investment is needed to expand online capacity,” he said. she declared. “So the current supermarket sweep could turn into a disappointing rollercoaster battle as grocers battle for market share. ”


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