CD&R Weighs Fresh Pledges to Stay in $9 Billion Morrison Race

Clayton Dubilier & Rice is pushing ahead with its pursuit of British grocery chain Wm Morrison Supermarkets Plc, as it seeks to beat an agreed 6.3 billion-pound ($8.7 billion) bid from Fortress Investment Group, people with knowledge of the matter said.

Morrison has granted CD&R access to confidential information as it works on an improved offer, the people said, asking not to be identified because the information is private. In addition to a potential increase in its bid, the buyout firm is considering what additional commitments it can make to win over Morrison’s board, the people said.

The proposal from Fortress came with a series of pledges on maintaining salaries, honoring supplier relationships and holding onto Morrison’s extensive property portfolio. Those assets are seen as particularly valuable to a private equity acquirer, which could quickly raise cash by selling the real estate and leasing it back to Morrison, though the practice is sometimes controversial.

CD&R has plenty of time to consider its options, as the deadline for it to submit a new offer isn’t until early August, the people said. The private equity firm is unlikely to rush into submitting a fresh bid, as there’s little advantage in showing its cards early. As CD&R seeks to trump Fortress, it also has to worry about a potential rival offer from Apollo Global Management Inc., which said July 5 it’s studying a bid.

Fortress’s proposal, which was its fifth offer, would give Morrison investors 252 pence per share in cash plus a 2 pence special dividend. CD&R’s earlier bid of 230 pence per share was its first proposal.

Morrison Chief Executive Officer David Potts is planning to meet U.K. Business Secretary Kwasi Kwarteng on July 16 to discuss the potential takeover, according to the people.

Deliberations are ongoing, and there’s no certainty CD&R will proceed with a fresh bid, the people said. Representatives for CD&R and Morrison declined to comment.

A spokesperson for the U.K. government said overseas investors play a “major and positive role” in stimulating economic growth.

“We are committed to ensuring that the U.K. remains open for business, while protecting the livelihoods of British workers,” the representative said in an emailed statement. “In most cases, it is right that mergers are treated as a commercial matter for the parties involved.”

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