Fortress Investment Group agreed to buy Wm Morrison Supermarkets Plc for about 6.3 billion pounds, potentially triggering a bidding war for one of the UK’s largest grocers. The group led by Fortress, a SoftBank Group Corp. subsidiary, has been in talks with Morrison since May and made five offers during the period, people familiar with the matter said. The supermarket chain said in June that it rejected a 5.5 billion-pound offer from Clayton Dubilier & Rice.
As essential businesses, grocery chains weathered the past year’s pandemic better than other retailers, and investors are seeking to capitalize on the stores’ improving fortunes as lockdowns end.
In a statement, Fortress pledged to stand by recent pay increases at Morrison as well as pensions and arrangements with suppliers. It also acknowledged the company’s role in the security of the UK’s food supply. The assurances came after CD&R’s bid drew some criticism from UK politicians; the Labour Party demanded close scrutiny of the potential foreign acquisition of a chain well known across Northern England and headquartered in Bradford, West Yorkshire.
Morrison hasn’t yet spoken to the government about the Fortress deal but intends to start the process now, a person familiar with the development said. Others in the Fortress consortium include the Canada Pension Plan Investment Board and the real estate arm of Koch Industries Inc., the largest privately held company in the US, run by the Koch family of prominent conservative political donors.
“The Morrison directors believe that the offer represents a fair and recommendable price for shareholders which recognizes Morrison’s future prospects," the grocer’s chairman, Andrew Higginson, said in a statement. Within a highly competitive, low-margin market, UK grocery stores are grappling with the rise of online shopping as well as challenges from German discounters Aldi and Lidl.
For each Morrison share, holders will receive 252 pence in cash and a 2 pence special dividend, according to the proposal. That is still below the 270 pence per share range some of Morrison’s top investors had been asking for to engage with CD&R, so there is potential for a counter-bid. Officials with CD&R declined to comment. The offer represents a premium of about 42% to the closing price of 178 pence per Morrison share as of June 18, the final day of trading before the start of the offer period, and a 41% premium to the volume-weighted average closing price of 180 pence per share for the three-month period ended June 18.
Fortress will also assume about 3.2 billion pounds of Morrison debt as part of the deal, the people said. The firm does not intend to carry out any material sale-and-leasebacks of Morrison stores, it said in the statement.
The Labour Party’s shadow minister for business and consumers called for legally binding commitments to protect the Morrison workforce and its pension scheme in the face of an “indifferent approach" by the UK government.
