Sat. Oct 23rd, 2021

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US private equity group Clayton, Dubilier and Rice have won the four-month takeover bid for Wm Morrison with a £ 9.97bn bid, including debt for the UK’s fourth largest supermarket.

The fate of the grocer, which was founded in 1899 and has been a listed business since 1967, was sealed in an auction process on Saturday, under the supervision of the British takeover regulator.

The winning bid of 287p per share was 2p per share above the existing offer of CD & R and just one cent above the 286p offered by a consortium led by Fortress Investment owned by SoftBank. His bid represents a business value of £ 9.95 billion.

CD&R pays a 61 percent premium to the price of Morrisons’ shares before the saga begins, while the total transaction value is 11.8 times the group’s underlying profit for the year to January 2021.

Directors of the grocery store will meet later today to decide which offer to recommend, although it is largely a formality. Investors in the group will be asked to approve the deal at a special meeting on October 19.

At least three-quarters of the voters must approve the transaction in order to proceed. Some shareholders have concern expressed earlier in the process on the structure of the deal and the price, but has not commented since.

The battle for Morrisons began behind the scenes in the spring and became public in early June when the company confirmed rejected a 230p share approach of CD&R.

For much of the summer, Fortress prevailed and a advice recommendation for a bid of 254 p per share and then increase it to 270p to fend off an objection.

But CD&R returned in August and a higher than expected 285p a share offer and persuaded the directors of the group to change their recommendation. It also has agreement reached to strengthen the group’s two pension funds with defined benefits by transferring additional property therein.

The Takeover Panel intervenes and reaches agreement between all parties to end the bidding war using an auction process performed more than five rounds in a single day.

Both bidders have vowed to retain the group’s existing management team – many of whom worked with CD & R adviser Sir Terry Leahy when he was rival CEO of rival Tesco – and the legacy of Sir Ken Morrison, the son of the founder of the group, which transformed it, maintained a national player.

But given the height of the bid, analysts believe that one of the bidders will have to make significant sale of assets and cost savings to deliver a reasonable return on their investment.

The deal, approved by the end of October, marks a period of remarkable upheaval in the UK’s highly competitive supermarket.

Against the backdrop of a global pandemic that has tested their operational capabilities to the limit, two of the four largest grocery stores with a quarter of the market between them would have changed hands.

In February, Asda, the third-largest supermarket, was sold to a consortium of TDR Capital and the Issa brothers in Blackburn.

There was also speculation about the fate of the second largest grocer, J Sainsbury, where the Qatar Investment Authority and the Czech billionaire Daniel Kretinsky are both major shareholders.

The Morrisons Marathon caters to investment banks, lawyers and public relations advisers in the city; according to the scheme documents from both sides, Morrisons will spend around £ 56 million on financial and legal advice, while CD & R’s account is expected to cost around £ 63 million. Fortress expects to spend £ 53 million.

CD&R will now spend millions more to arrange a multi-billion pound package to help finance the takeover.

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