Morrisons, Britain’s fourth-largest grocer, agreed to a revised offer of £6.7 billion ($9.3bn) from Fortress Investment Group on Friday, amid a heated battle to take over the supermarket chain.
US investment firm Fortress boosted its offer to £2.72 per share, from an effective £2.54 per share worth £6.3bn, days before the Monday deadline for rival bidder former Tesco boss Sir Terry Leahy and Clayton Dubilier & Rice (CD&R).
The Morrisons board reaffirmed its support for the deal, while Fortress said in a statement that the private equity group “remains committed to becoming the new owner of Morrisons” and to being a “responsible long-term steward” of the company in “the next stage of its evolution”.
Morrisons has attracted interest from private equity groups because of its large real estate portfolio, with the company owning about 90 per cent of its almost 500 stores.
The business, whose turnaround has been led by chief executive Dave Potts, generates large amounts of cash and has low underlying debt and a pension surplus.
However, Morrisons is among a number of British supermarkets attracting the interest of buy-out bidders in recent months, after the UK grocery sector saw their fortunes change dramatically during the pandemic, when a series of lockdowns triggered a surge in spending.
Asda was snapped up in a £6.8 billion ($9.4bn) buy-out by the Issa brothers and London private equity firm TDR Capital last year, who took on £3.5bn of debt to fund the acquisition from Walmart. Interest has also zoned in on Sainsbury’s in response to the company's bullish growth.
But it’s not all plain sailing for the buyers, with concerns about assets being sold off too cheaply, and the industry facing a number of major challenges, from staff shortages to global food price pressures and Covid supply chain disruption.
Russ Mould, investment director at AJ Bell, said the counterbid for Morrisons was an example of private equity suitors having to raise their offers this year as companies and shareholders push back on initial approaches, saying they are too low.
“Private equity firms have a reputation for trying to get a bargain, but their tactics have been fully exposed this year and it now seems rare for the first offer to be the winning one,” Mr Mould said.
Morrison shares jumped to as high as £2.79 in London trading after the announcement, indicating some investors anticipate a higher bid.
The company previously rejected a £2.30 offer worth £5.52bn from CD&R, with the rival private equity group given until Monday to submit a new offer by Britain's Takeover Panel, which regulates corporate takeovers.