Top Morrison Holder Says $9 Billion Bid Would Merit Engagement

One of Wm Morrison Supermarkets Plc’s top shareholders said the U.K. grocer should engage if private equity suitor Clayton Dubilier & Rice boosts its bid to 6.5 billion pounds ($9 billion).

An offer approaching 270 pence per share would merit consideration, J O Hambro Capital Management Ltd. said by email Tuesday. Morrison’s board was right to reject CD&R’s proposal of 230 pence per share, as the buyout firm should pay a fair price for the “clear” synergies it would enjoy, according to the fund manager.

Morrison’s shares have been trading above the initial bid on expectations of an increased offer. They were down 0.1% to 234.30 pence at 12:35 p.m. Tuesday in London.

“There is validity” to a private equity bid for Morrison, which has a resilient business model that’s differentiated from its peer group, J O Hambro said. A more aggressive approach, where a suitor pursues a sale and leaseback of Morrison’s real estate to fund cash payouts or faster growth, could be worth 280 pence per share or more, according to the statement.

J O Hambro said its funds own a combined 3% of Morrison’s listed shares. That would put it among the company’s 10 biggest investors, according to data compiled by Bloomberg.

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