Morrisons takeover gets shareholder approval

A general view of a Morrisons supermarket on May 06, 2020 in Bradford, England. (Photo by George Wood/Getty Images)

Shareholders in Morrisons on Tuesday approved a £7 billion agreed takeover by US private equity firm Clayton, Dubilier & Rice (CD&R).

Earlier this month, CD&R has won the auction for Morrisons, paving the way for the firm to take control of Britain’s fourth-biggest supermarket group.

The board of Morrisons recommended CD&R’s 287 pence per share bid on 2 October, hours after its bid beat a consortium led by Softbank owned Fortress Investment Group, which had made an offer worth just a penny less per share at 286 pence.

As the shareholders approved the offer, CD&R could complete the takeover by the end of the month, making Morrisons the second UK supermarket chain in a year to be acquired by private equity after a buyout of no. 3 player Asda, completed in February.

Sainsbury’s has in recent months been mooted as another possible target for private equity and investment companies.

CD&R has committed to retaining Morrisons’ headquarters in Bradford, northern England, and its existing management team, led by CEO David Potts.

It also says it will execute the supermarket chain’s existing strategy, not sell its freehold store estate and maintain staff pay rates.

These commitments are not legally binding, however.

The takeover battle which has been running since May is the most high-profile of a raft of bids for British companies this year, reflecting private equity’s appetite for cash-generating UK assets.

CD&R’s winning bid was only marginally above its 285 pence a share offer which had already been recommended in August.

The final offer represents a 61 per cent premium on Morrisons’ share price before takeover interest publicly emerged in mid-June. Some analysts have said the victor may have to sell off assets, such as factories, warehouses or stores, to make a decent return.

CD&R could combine its 918 Motor Fuel Group (MFG) fuel forecourts with the 339 owned by Morrisons, opening Morrisons convenience stores on the sites, but that could face scrutiny from the competition regulator.

CD&R’s victory also marks a triumphant return to the UK grocery sector for Terry Leahy, the former chief executive of Tesco, who is a senior adviser to CD&R.

Leahy was CEO of Tesco for 14 years to 2011 and will now be reunited with Morrisons’ Potts and Higginson, two of his closest lieutenants at Tesco.

Potts, who joined Tesco as a 16-year-old shelf-stacker, will make more than £10 million from selling his Morrisons shares to CD&R. Chief operating officer Trevor Strain will pocket about £4 million.