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A $ 53 Billion Acquisition Firm In The US Leads The Morrison Takeover Fight

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A $ 53 Billion Acquisition Firm In The US Leads The Morrison Takeover Fight

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(Bloomberg) – A group of investors backed by a SoftBank subsidiary, the American billionaire Koch family and others is positioning themselves as the white knight riding to the rescue of Wm Morrison Supermarkets Plc.

Now comes the task of persuading investors, customers and politicians that a foreign private equity acquisition of Britain’s fourth largest supermarket chain is in their best interest.

The supermarket operator agreed to an acquisition for approximately 6.3 billion pounds ($ 8.7 billion) of the consortium led by Fortress Investment Group after rejecting a lower offer from Clayton Dubilier & Rice in June. Although even higher bids may still emerge, Morrison is already listing reasons to support Fortress.

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“They are supporting our management, our strategy and our people,” CEO Dave Potts, 64, told Bloomberg News by phone Saturday about the private equity group. “Fortress can see the value in Morrison’s business.”

Potts also did a live webcast with some of Morrison’s 113,000 employees to discuss the Fortress offering.

Rising fortunes

The fight for Morrison highlights continued interest in Britain’s supermarkets following the purchase of Asda, the UK’s third-largest grocery store, for 6.5 billion pounds. Private equity investors want to capitalize on the improved fortunes of leading chains after lockdowns triggered increased spending on groceries in stores and online. A Morrison acquisition will be the largest purchase by a UK-listed company in at least a decade, according to data compiled by Bloomberg News.

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Morrison turned down the CD & R cash offer of around £ 5.5 billion three days after receiving it on June 14, but the Fortress-led investor group has been talking to the grocery company since May and made five offers during the period, people familiar with said the matter.

In announcing its deal on Saturday, the consortium outlined commitments that included maintaining the salary and pensions of Morrison’s employees in an attempt to avoid political opposition to the deal. UK lawmakers have already asked the government to intervene in any takeover of the grocer. Morrison is based in Bradford, West Yorkshire, a longtime Labor Party stronghold where Prime Minister Boris Johnson’s Conservatives made big strides in the most recent national elections.

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The acquisition battle comes at a time of increased scrutiny and media attention on private equity firms acquiring UK-listed companies at a record pace.

Labor concerns

Unite, the union that represents Morrison’s workers, called for urgent talks with the grocer’s management to seek assurances on issues including jobs in response to the Fortress purchase.

“We will not allow another acquisition of a strong UK business to see workers trampled on as the boardroom and shareholders stampede towards their bonanzas,” Unite said in a statement.

Wes Edens, Co-CEO of Fortress, is already an investor in the UK as a co-owner of Premier League football club Aston Villa.

Founded by Edens and Randy Nardone in 1998, Fortress has operated independently from SoftBank Group since the Masayoshi Son conglomerate bought it for $ 3.3 billion in 2017. The firm has former Goldman Sachs Group Inc. banker Christopher Linkas and former analyst Deutsche Bank AG’s Rahul Ahuja among his London staff, according to LinkedIn. It has about $ 53 billion in assets under management.

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Koch Industries

Other members of the consortium to buy Morrison include the Toronto-based Canada Pension Plan Investment Board and the real estate arm of Koch Industries Inc., one of the largest private companies in the United States. President and CEO Charles Koch and his extended family have a combined fortune of more than $ 120 billion, according to the Bloomberg Billionaires Index, and are well-known supporters of conservative and libertarian political causes.

HSBC and RBC Capital are advising Fortress and also providing debt financing for the deal.

Morrison has not yet spoken to the government about the Fortress deal, but intends to begin the process now, a person familiar with the matter said. In its statement, the firm said it does not intend to make any sale and lease of material from the nearly 500 Morrison stores.

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By contrast, people familiar with Morrison’s CD & R offering last month said the firm was interested in the sale and leaseback of grocery stores, a strategy that attracted the likes of TDR Group to Asda’s supermarkets. Walmart last year.

Morrison’s wholly owned real estate portfolio is the “cornerstone” of his business, Potts said.

“There is nothing I have seen so far that makes me not trust what I have learned about Fortress and the commitments they are making,” said Potts.

The Fortress-led offering represents a premium of about 42% over Morrison’s closing price of 178 pence per share as of June 18, the last trading day before the start of the offering period.

That’s below the 270-cent-a-share range that some of Morrison’s top investors had been asking to commit to CD&R, so there is the possibility of counter offers. Last month, CD&R was already lining up more finance banks as it considers raising its offer, people with knowledge of the matter said.

CD&R has led two of the ten purchases of companies listed in the UK this year. The New York-based firm agreed to buy UDG Healthcare Plc in June after a sweetened offering of roughly 2.8 billion pounds, and in February it acquired Ferguson Plc’s Wolseley UK plumbing business for 308 million pounds. CD&R officials declined to comment on Saturday.

For now, Potts is focused on the Fortress offering and awaits a response from Morrison’s shareholders.

“We’ll see where life takes us now,” he said.

© 2021 Bloomberg LP

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