By Scott Wright
THE City of London set the scene for a bidding war for Wm Morrison after investors reacted to the latest takeover developments surrounding the grocer by sending its shares soaring.
Shares in Morrisons, the UK’s fourth biggest supermarket chain, closed up nearly 12 per cent as investors responded to the board’s approval of a takeover offer valuing the group at £6.3 billion, and the prospect of a further suitor entering the fray.
On Saturday, the Morrisons’ board recommended that shareholders vote in favour of an approach led by Fortress Investment Group equal to 252p for each share, plus a special dividend of 2p per share.
The offer from Fortress, which has been joined in the approach by Canada Pension Plan Investment Board and Koch Real Estate Investments, was a 42 per cent premium to Morrisons’ closing price on June 18 – immediately prior to a takeover approach from private equity player Clayton, Dubilier & Rice. The CD&R approach valued Morrisons at £5.5bn and was dismissed by the board as undervaluing the business.
Shares in Morrisons rose in the aftermath of the CD&R approach and continued their ascent yesterday, as investors signalled their expectation a bidding war could be on the way.
It emerged yesterday that private equity giant Apollo Global Management has shown interest, although it has still to table a formal proposal.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “With a trio of hungry firms circling, it shows there is a big appetite for a bite of the UK supermarket sector. Wm Morrison is seen as a bargain compared to overseas peers, with its deep integrated supply chain and the fact that it owns much of its store estate.”
Shares in Morrisons closed up 27.7p, or 11.55%, at 267.5p. The closing price was higher than the value attached to Morrisons under the Fortress approach.
Fortress, which was bought by Japan’s Softbank for $3.3 billion (£2.4 billion) in 2017, has previously invested in grocery retail in both North America and Europe.
In 2019, the private equity firm snapped up UK wine retailer Majestic Wines for about £95 million.
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