Fortress Sweetens Offer for U.K. Grocer Morrison to £6.7 Billion
(Bloomberg) -- Fortress Investment Group sweetened its bid for Wm Morrison Supermarkets Plc to 6.7 billion pounds ($9.3 billion), moving to head off a potential rival and placate investors who found its earlier offer too low.
The Fortress-led consortium offered 270 pence a share plus a 2 pence dividend for Britain’s fourth-largest grocer, up 7% from a previous bid of 254 pence, including the dividend. The board of Morrison backed the offer from Fortress, which made binding promises on pay and pensions.
Morrison jumped as high as 279.60 pence in London, signaling some investors anticipate a higher bid. The grocer previously rejected a 230 pence-a-share overture from Clayton, Dubilier & Rice LLC, and the rival private equity group has until Monday to increase its offer.
Buyout firms are vying for the British grocer in part because of its large real estate portfolio -- it owns about 90% of its almost 500 stores. The business, led by Chief Executive Officer Dave Potts, also generates large amounts of cash and has low underlying debt and a large pension surplus. The fortunes of leading supermarkets have also improved after lockdowns triggered a surge in grocery spending and changed shopping habits.
The raised offer comes not only ahead of a possible bid from CD&R, but also after some shareholders expressed discontent with the original Fortress bid. Silchester International, M&G Plc, and J O Hambro Capital Management, investors who together control almost 20% of Morrison, previously said Fortress’s earlier proposal didn’t reflect the true value of the company.
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The Fortress bidding group includes the billionaire Koch family, the Canada Pension Plan Investment Board and Singapore sovereign wealth fund GIC. Apollo Global Management Inc., which came close to taking majority control of British grocer Asda, has said it’s considering joining the Fortress consortium.
In addition to making binding pledges on salaries, Fortress also promised to honor supplier relationships and avoid material sales and leasebacks of the grocer’s property.
Fortress’s pre-emptive move will increase pressure on CD&R. The private equity group is speaking with some of the investors in its funds on a fresh bid, Bloomberg reported last month. The “put up or shut up” deadline of Monday can only be extended with the agreement of Morrison and the U.K. Takeover Panel, a body which regulates mergers and acquisitions.
Time for any extension could be limited as shareholders are set to vote on Fortress’s updated offer on Aug. 16. The consortium requires 75% support from shareholders.
The CD&R bid is being led by Terry Leahy, a former CEO of Tesco Plc, Britain’s largest grocer. He has a long history with most of the Morrison management team, including Potts and chairman Andy Higginson, who spent much of their careers at Tesco.
Britain’s grocery sector has been beset with merger activity in recent years, driven by a highly competitive market. The country’s third-largest grocer, Asda, was taken over by TDR Capital and the Issa brothers in a 6.5 billion-pound deal. Walmart Inc., the U.S. retailer which owned Asda since 1999, retains a minority stake.
Elsewhere in Europe, France’s Carrefour SA was targeted for a takeover by Canada’s Alimentation Couche-Tard Inc. That effort was torpedoed by the French government, which took exception to one of the country’s biggest supermarkets falling into foreign hands.
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