Battle for Britain’s Morrisons hots up as Apollo enters fray

New York-headquartered Apollo Global Management, which last year missed out on buying Morrisons rival Asda, said it was examining a potential offer but had not approached its board.

Private equity groups have embarked on a spending spree on assets around the world in the last six months, flush with cash after they largely sat out the pandemic. Morrisons, set up 122 years ago as a market stall in Bradford, northern England, is a target.

On Saturday, Morrisons said its board had recommended a takeover led by SoftBank-owned Fortress Investment Group that valued Britain’s fourth-largest supermarket chain at $8.7bn.

The offer from Fortress, along with Canada Pension Plan Investment Board and Koch Real Estate Investments, exceeded a £5.52bn proposal from Clayton, Dubilier & Rice, which Morrisons rejected on June 17.

While the Fortress offer was on Monday described as “good value” by abrdn – a number 15 investor in Morrisons according to Refinitiv data – it was less than the 6.5 billion pounds asked for last week by JO Hambro, a top 10 shareholder.

Fortress’ offer gives Morrisons an enterprise value of £9.5bn when including net debt of £3.2bn.

Its shares were up 11.4% at 267.1 pence at 1523 GMT – ahead of the 254 pence value of the Fortress deal, indicating investors expect higher offers. Morrisons had no comment on Apollo’s statement.

Analysts have speculated that other private equity groups and Amazon, which has a partnership deal with Morrisons, could also bid. Amazon has declined to comment.

While Britain has always been a key destination in Europe for private equity investments, volumes have peaked this year as Brexit and sterling weakness coupled with the coronavirus crisis hit company valuations.

Like its peers Tesco, Sainsbury’s and Asda, Morrisons enjoyed a surge in sales in the last 18 months, as hospitality was forced to shut, but the cost of ramping up online delivery hit profits.

Source: Reuters