© Reuters. FILE PHOTO: A Morrisons store is pictured in St Albans, Britain on September 10, 2020. REUTERS / Peter Cziborra // file photo
By James Davey
LONDON (Reuters) – Morrisons has agreed to acquire, led by Fortress Investment Group, owned SoftBank, the UK's fourth largest supermarket chain valued at £ 6.3 billion ($ 8.7 billion) and a competing offer from a US private company -Equity Society Outperforms.
Fortress's offer, along with the Canada Pension Plan Investment Board and Koch Real Estate Investments, exceeds 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 top 10 Morrisons investor JO Hambro asked for last week.
Shareholders will be able to vote on the Fortress offer, which gives the supermarket chain an enterprise value of £ 9.5 billion, given its net debt of 3.2 billion.
Under UK takeover rules, CD&R has until July 17th to submit a firm offer. CD&R declined to comment.
Analysts have also speculated that other private equity groups and Amazon (NASDAQ :), which has a partnership agreement with Morrisons, could enter into a potential bidding war.
The Fortress deal underscores the growing appetite of private funds for UK supermarket chains, which are attractive because of their cash generation and ownership.
"We took a very careful look at Fortress' approach, plans for the business and overall suitability to own a unique UK grocery manufacturer and shop owner with over 110,000 colleagues and an important role in UK food production and agriculture," said Morrisons Chairman Andrew Higginson .
"We understand that Fortress fully understands and fully recognizes the fundamental nature of the Morrisons."
Fortress, an independently owned subsidiary of Japan's SoftBank Group Corp, is a global investment manager with approximately $ 53 billion in assets under management as of March. It bought British wine seller Majestic Wine in 2019.
"We strive to be good stewards of Morrisons in order to best serve its stakeholders and the wider UK public over the long term," said Managing Partner Joshua A. Pack.
However, the British opposition Labor party has requested a close scrutiny by the government.
"There is an urgent need for ministers to work with Morrisons and the consortium to ensure that important commitments to protect the workforce and the pension system are legally binding and upheld," said Labor spokeswoman Seema Malhotra.
Fortress intends to keep Morrisons' headquarters in Bradford, Northern England and its existing management team, led by CEO David Potts, and to execute on its existing strategy. Sale-and-leaseback transactions for material stores are not planned.
Potts would make £ 9.2 million selling his shares in Fortress, while Chief Operating Officer Trevor Strain would pocket £ 3.6 million.
Under the terms of the transaction, which the Morrisons Board of Directors recommends to shareholders, investors would receive 254p per share – 252p in cash and a special dividend of 2p. CD & R's proposal was 230 pence per share.
Morrisons started out as an egg and butter trader in 1899. Today it is only behind British market leaders Tesco (OTC :), Sainsbury & # 39; s and Asda in terms of annual sales.
Morrisons owns 85% of its nearly 500 stores and 19 manufacturing facilities, most of which are owned. It is unique among UK supermarkets in that it produces more than half of the fresh food it sells.
It said the Fortress offer represented a 42% premium to its closing price of 178 pence on June 18, the day before CD & R's offer. The stock closed at 243 pence on Friday.
Morrisons said an initial unsolicited proposal was received from Fortress on May 4th at 220p per share. This offer was not published. Fortress then made four more suggestions before offering a total of 254 units per share on June 5.
The offers for Morrisons follow in February the purchase of a majority stake in Asda from Walmart (NYSE 🙂 by Zuber and Mohsin Issa and private equity firm TDR Capital. The deal valued Asda at £ 6.8 billion.
This transaction followed Sainsbury's failure to acquire Asda after an agreed deal was blocked by UK competition authorities in 2019.
In April, Czech billionaire Daniel Kretinsky increased his stake in Sainsbury's to nearly 10%, sparking speculation about the takeover.
($ 1 = 0.7235 pounds)