British Morrisons Go Private

Morrisons store. Photo: Paul Maguire/Dreamstime
Photo: Paul Maguire/Dreamstime
By Reidar Molthe

29 October 2021 09:17

British Morrisons Go Private

Shareholders in Morrisons have approved CD&R’s £7.1bn takeover offer, bringing the curtain down on a fiercely contested battle for the UK’s fourth-largest grocer.

Despite a last-ditch rebellion from some smaller independent shareholders, strong backing from institutional investors ensured the deal secured approval from 99.2% of shares voted, well over the 75% required level, according to Namnews.

CD&R, which has former Tesco (TSCO.L) boss Terry Leahy as a senior adviser, won an auction for Morrisons, bidding a penny a share more than a consortium led by Softbank-owned Fortress Investment Group. CD&R's winning bid of 287 pence a share represented a hefty 61% premium on Morrisons' share price before takeover interest publicly emerged in mid-June.

Formal completion of the deal, expected on Oct. 27, will conclude a six-month battle to buy Morrisons, Britain's fourth-biggest grocer and one of the country's biggest food producers. It will end Morrisons' 54-year run as a publicly listed company and see the ultimate decisions on the group's future shift from Bradford to the New York home of CD&R, writes Reuters.

Long history

Morrisons, which started out as an egg and butter merchant in 1899, trails market leader Tesco, Sainsbury's (SBRY.L) and Asda in annual revenue. The battle for Morrisons has been the most high-profile amid a raft of bids for British companies this year, reflecting private equity's appetite for cash-generating UK assets.

CD&R has committed to retaining Morrisons' Bradford base and its existing management team, led by CEO David Potts. It has also said it will execute the supermarket chain's existing strategy, not sell its freehold store estate, and maintain staff pay rates. Those commitments are not legally binding, however.

“We are very pleased to have received the approval of shareholders and are excited at the opportunity that lies ahead," said Leahy, who is expected to succeed Andrew Higginson as Morrisons' chairman.

“The particular heritage, culture, and operating model of Morrisons are key features of the company and we will be very mindful of these during our tenure as owners,” argues the former Tesco boss.

Terry Leahy was many years ago considered a saintly businessman, leading Tesco to one victory after another. After many failed investments internationally and not least a major accounting scandal a number of years ago, fame has faded. In any case, he is still considered a useful ally for American investors.

Second Private Equity Buyout

Morrisons is the second UK supermarket chain in a year to be acquired by private equity after a buyout of No. 3 player Asda, by the Issa brothers and TDR Capital, completed in February.

Potts, who started his retail career at Tesco as a 16-year-old shelf stacker, will make more than 10 million pounds from selling his Morrisons shares to CD&R. Chief Operating Officer Trevor Strain will pocket about 4 million pounds.

The deal will put Morrisons into private hands for the first time since the founding family listed it on the stock market in 1967.

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