Morrisons agreed to a £ 7 billion takeover by US private equity group Clayton, Dubilier & Rice in the final round in a bitter fight for control of the country’s fourth-largest supermarket chain.
The Bradford-based grocer confirmed Thursday evening that he had accepted an improved 285p per share offer from the private equity firm that improved the offer on the table to rival contender Fortress.
In June, CD&R put Morrisons on the line after its initial 230 pence stock bet – worth £ 5.5bn – was dismissed on the grounds that it “significantly undervalued” the retailer .
Its new offer is a 60% premium to the Morrisons share price on June 18, the day before the first public announcement of the offer’s interest in the company.
Andrew Higginson, Chairman of Morrisons, said the CD&R offering represented “good shareholder value while protecting the fundamentals of Morrisons for all stakeholders.”
“CD&R has a strong track record of developing, strengthening and growing the companies in which they invest,” said Higginson. “This, combined with the strong intentions they set out today, gives the Board of Directors confidence that CD&R will be a responsible, thoughtful and prudent owner of a major UK grocery company. “
Sir Terry Leahy, the former CEO of Tesco, is a senior advisor to CD&R. He worked alongside Higginson and David Potts, the Managing Director of Morrisons, during his long reign at Tesco.
In a video message, Leahy described Morrisons as a “great company with a great future”. CD&R was excited to work with Potts and the rest of the leadership team to “create more success for all of its stakeholders,” he said.
Unions worry about the current wave of private equity takeovers hitting UK businesses, as companies fear their real estate will be stripped of their real estate, laden with debt and working conditions do not deteriorate.
However, Leahy said he knew Morrisons’ late founder, Sir Ken Morrison, and “understood the vision and values on which he had built his business,” which were defended by Potts.
As part of the terms of the deal, CD&R promised that the company’s head office would remain in Bradford. He said he had no intention of selling his valuable store estate to raise funds and fully supported Morrisons’ recent salary award of at least £ 10 an hour for all colleagues in stores and manufacturing sites. He also had no plans to change the benefits provided by his pension plans.
CD&R was delighted to be working with the current management team “not only to preserve Morrisons’ traditional strengths, but in fact to develop them with innovation, capital and new technology,” Leahy said.
“Our entire approach as a company over the past four decades has been to create and grow the companies we invest in. We know that customers love Morrisons and that the managers and staff of the company try to provide better customer service every day… we at CD&R are committed to helping them do it in every way possible.
CD&R’s bid outweighs the £ 6.7 billion offered by rival US investor Fortress. Earlier this month, the investment group, which already owns Majestic Wine and is itself owned by Japanese investment firm SoftBank, attempted to thwart CD&R by increasing its bid to 270 pence per share plus a dividend. special of 2 pence per share, an increase of £ 400 million. on its initial £ 6.3 billion offer made in early July.
In a statement Thursday night, Fortress noted the developments and said she was “looking at her options.”
Fortress increased its bid after Morrisons’ largest shareholder, Silchester International Investors, which owns a 15% stake, said it was “not inclined to support” the group’s initial 254p per share offer. Fortress. The fund manager said Morrisons board should “allow more time to respond to other parties who may provide better value to Morrison’s public shareholders.”
The Morrisons board has withdrawn its previous support for the Fortress offer, with shareholders to be asked to vote on the enhanced CD&R offer in October.