By James Davey
LONDON (Reuters) – The $ 8.7 billion bidding battle for Britain’s fourth-largest supermarket group Morrisons escalated on Monday when a third private equity group, Apollo Global Management (NYSE :), entered the the fray.
The US group Apollo, which last year failed to buy Asda, the No. 3 in the UK, said it was in the preliminary stages of evaluating a possible offer for Morrisons, but had not approached its board.
On Saturday, Morrisons said the board, led by Chairman Andrew Higginson, had recommended an acquisition led by SoftBank-owned Fortress Investment Group, which valued the company at 6.3 billion pounds ($ 8.7 billion).
Fortress’s offer, along with the Canada Pension Plan Investment Board and Koch Real Estate Investments, beat an unsolicited £ 5.52 billion proposal from Clayton, Dubilier & Rice (CD&R), which Morrisons rejected on June 19. .
However, it was less than the 6.5 billion pounds that JO Hambro, one of Morrison’s top 10 investors, asked for last week.
Ultimately, the fate of Morrisons will be decided by its shareholders. As things currently stand, they will vote on the Fortress deal.
Morrisons’ top three investors Silchester, Blackrock (NYSE 🙂 and Columbia Threadneedle, whose Refinitiv data showed holdings of 15.2%, 9.6% and 9.4% respectively, are effectively the king makers. None have commented so far.
Analysts have speculated that other private equity groups and Amazon (NASDAQ :), which has a partnership agreement with Morrisons, could create a potential tender.
Morrisons shares were up 11.4% to 267.3 pence as of 0735 GMT, ahead of the 254 pence value of the Fortress deal, indicating that investors are expecting higher offers.
Under UK procurement rules, CD&R has until July 17 to come back with a firm offer.
The Acquisition Panel has not yet announced the deadline by which Apollo must clarify its intentions in relation to Morrisons.
The interest in Morrisons underscores the growing appetite of private funds for British supermarket chains, which are seen as attractive due to their cash generation and freehold assets. The funds believe the stock market is failing to recognize the value of shopkeepers in the wake of the COVID-19 pandemic.
Morrisons started out as an egg and butter merchant in 1899. Now it is behind only the UK market leader Tesco (OTC :), Sainsbury’s and Asda in annual sales.
Morrisons owns 85% of its nearly 500 stores and has 19 mostly wholly-owned manufacturing sites. It is unique among British supermarkets in that it produces more than half of the fresh food it sells.
Last year, Apollo lost the Asda purchase to brothers Zuber and Mohsin Issa and TDR Capital. That deal valued Asda at 6.8 billion pounds.
Shares of Tesco and Sainsbury’s rose 1% and 1.4%, respectively, on speculation that they could also attract offers. Both companies declined to comment.
Apollo says his private equity business had more than $ 89 billion in assets under management at the end of March 2021, in 150 companies like Watches of Switzerland, TMT group Endemol Shine, sportsbook. Ladbrokes (LON 🙂 Coral and Norwegian Cruise Line (NYSE :).
($ 1 = 0.7232 pounds)