Third PE firm joins battle for Morrisons even as supermarket agrees £6.3bn deal

The £6.2 billion bid battle for Britain’s fourth largest supermarket group Morrisons ratcheted up on Monday when a third private equity group, Apollo Global Management, entered the fray.

US group Apollo, which last year missed out on buying Asda, the No. 3 grocery player in the UK, said it was in the preliminary stages of evaluating a possible offer for Morrisons but had not approached its board.

On Saturday Morrisons said the board, led by Chairman Andrew Higginson, had recommended a takeover led by SoftBank owned Fortress Investment Group that valued the firm at £6.3bn.

The offer from Fortress, along with Canada Pension Plan Investment Board and Koch Real Estate Investments, exceeded a £5.52bn unsolicited proposal from Clayton, Dubilier & Rice (CD&R), which Morrisons rejected on June 19.

However, it was less than the £6.5bn asked for by top 10 Morrisons investor JO Hambro last week.

Ultimately, the fate of Morrisons will be decided by its shareholders. As things currently stand they will vote on the Fortress deal.

Morrisons’ three biggest investors Silchester, Blackrock and Columbia Threadneedle, which Refinitiv data showed having stakes of 15.2 per cent, 9.6 per cent and 9.4 per cent respectively, are effectively the kingmakers. None has commented so far.

Analysts have speculated that other private equity groups and Amazon, which has a partnership deal with Morrisons, could create a potential bidding war.

Under British takeover rules CD&R has until July 17 to come back with a firm offer.

The Takeover Panel is yet to announce the deadline by which Apollo must clarify its intentions in relation to Morrisons.

The interest in Morrisons underlines the growing appetite from private funds for British supermarket chains, which are seen as attractive because of their cash generation and freehold assets. The funds believe the stock market is not recognising the grocers’ value in the wake of the Covid-19 pandemic.

Morrisons started out as an egg and butter merchant in 1899. It now only trails UK market leader Tesco, Sainsbury’s and Asda in annual sales.

Morrisons owns 85 per cent of its nearly 500 stores and has 19 mostly freehold manufacturing sites. It is unique among British supermarkets in making over half of the fresh food it sells.

Last year Apollo lost out on buying Asda to brothers Zuber and Mohsin Issa and TDR Capital. That deal valued Asda at £6.8bn.

Apollo says its private equity business had more than $89bn (£64bn) in assets under management by the end of March 2021, in 150 companies such as Watches of Switzerland, TMT group Endemol Shine, bookmaker Ladbrokes Coral and Norwegian Cruise Line.