Why Bradford-based Morrisons' decision to agree a £6.3bn takeover bid marks major shake-up for grocery sector
Morrisons supermarket has agreed to a £6.3 billion takeover bid from a consortium of investment groups.
The offer, led by Softbank-owned Fortress which has partnered with Canada Pension Plan Investment Board and Koch Real Estate Investments, will see shareholders receive 252p per share plus a 2p special dividend.
The all cash offer is subject to shareholder approval.
The offer represents a 42% premium on the Morrisons share price before it was announced that the supermarket had rejected a takeover proposal from New York-based firm Clayton, Dubilier & Rice (CD&R) last month.
Fortress has invested in grocery retail in both North America and Europe, and has invested in Majestic Wine in the UK.
In the US, Fortress has invested in the grocery industry, petrol forecourt stations and retail and restaurants.
Andrew Higginson, chairman of Morrisons, said: “The Morrisons directors believe that the offer represents a fair and recommendable price for shareholders which recognises Morrisons’ future prospects.
“Morrisons is an outstanding business and our performance through the pandemic has further improved our standing and enabled us to enter the discussions with Fortress from a hard-won position of strength.
“We have looked very carefully at Fortress’ approach, their plans for the business and their overall suitability as an owner of a unique British food-maker and shopkeeper with over 110,000 colleagues and an important role in British food production and farming.
“It’s clear to us that Fortress has a full understanding and appreciation of the fundamental character of Morrisons.
“This, together with the very clear intentions they have set out today, has given the Morrisons directors confidence that Fortress will support and accelerate our plans to develop and strengthen Morrisons further.”
Joshua A Pack, managing partner of Fortress, said: “We believe in making long-term investments focused on providing strong management teams with the necessary flexibility and support to execute their strategy in a sustainable and value-enhancing manner.
“We fully recognise Morrisons’ rich history and the very important role Morrisons plays for colleagues, customers, members of the Morrisons pension schemes, local communities, partner suppliers and farmers.
“We are committed to being good stewards of Morrisons to best serve its stakeholder groups, and the wider British public, for the long term.”
Seema Malhotra, Labour’s shadow minister for business and consumers, said: “Britain’s supermarkets provide an essential national service and the Covid crisis has highlighted their importance to customers, communities and our retail and farming industries.
“Any takeover bid must therefore be closely scrutinised by the Government.
“Ministers must urgently work with Morrisons and the consortium to ensure that crucial commitments to protect the workforce and the pension scheme are legally binding, and met.
“Ministers must also ensure legal promises are made about the integrity and future of the business, including any impact on the supply chain and distribution centres.”
Richard Lim, chief executive of research consultancy Retail Economics said: “This signals the biggest shakeup in the UK grocery sector for over a decade.
“The grocery sector is transitioning through a period of enormous change as the impact of the pandemic has shifted buying behaviour.
“Navigating the fast-paced change in market dynamics, customer behaviour and the pressures on the food supply chain in a post-Brexit environment will be no easy feat.
“Success will hinge on the new owners gaining the support of experienced key members of the leadership team to execute on the future strategy.
“This will be critical given the pace of change sweeping through the industry.”
Adrian Jones, Unite national officer representing Morrisons’ warehouse and distribution workers said: “Unite is now seeking urgent talks with Morrisons to protect our members’ jobs and conditions.
“We won’t allow another takeover of a strong UK business see the workers trampled over as the boardroom and shareholders rush towards their bonanzas.
“Morrisons is unique in UK supermarkets in that is owns its supply chain, from the farm to the warehouse.
“Morrisons workers have made this business strong and profitable – they deserve to have their dedication rewarded by the owners.
“Unite will meet urgently with the management team to turn their promises that the workers’ jobs and terms will not be undermined into unbreakable guarantees.
“Only with such cast-iron guarantees can there be any hope of Unite and our members cooperating with this sale.”
Joanne McGuinness, national officer of the shopworkers’ union Usdaw said: “We are seeking urgent meetings with Morrisons’ current management and the prospective new owners to ensure that our members’ interests and the long-term future of the business are protected throughout this process.
“In the meantime we are providing our members with the support and advice they need through this period of uncertainty.”