CD&R wins $ 10 billion auction for UK supermarket Morrisons

LONDON, October 2 (Reuters) – Clayton, Dubilier & Rice (CD&R) has won the auction for Morrisons (MRW.L) with a bid of £ 7 billion ($ 9.5 billion), paving the way for the US private equity firm to take control of the UK’s fourth largest supermarket group.

The Morrisons board recommended the CD&R 287 pence per share offer on Saturday, hours after its offer beat a consortium led by Softbank-owned Fortress Investment Group (9434.T), which had made a offer a penny less per share at 286 pence.

CD&R’s victory marks a triumphant return to the UK grocery industry for Terry Leahy, the former Managing Director of Britain’s largest supermarket chain Tesco (TSCO.L), who is a senior advisor to CD&R.

The board of directors recommended that shareholders vote in favor of the 287 pence per share offer at a meeting scheduled for October 19, saying the private equity group had confirmed that its previously stated intentions towards Morrisons remained. unchanged.

“Today’s final offer from CD&R represents excellent shareholder value while protecting Morrisons’ fundamentals for all stakeholders,” Morrisons Chairman Andrew Higginson said in a statement.

If shareholders approve the offer, CD&R could complete its buyout by the end of the month, making Morrisons the second UK supermarket chain in a year to be bought out by private equity after a no. 3-player Asda, completed in February.

EGGS AND BUTTER

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

He also says he will execute on the supermarket chain’s existing strategy, not sell his freehold store area and maintain staff pay rates.

However, these commitments are not legally binding.

Morrisons started out as an egg and butter merchant in 1899. He listed his shares in 1967 and is Britain’s fourth largest grocer after Tesco, Sainsbury’s (SBRY.L) and Asda.

The takeover battle that has unfolded since May has been the most high-profile in a series of UK company takeover bids this year, reflecting private equity’s appetite for UK cash-generating assets.

CD & R’s winning bid was only slightly above its 285 pence stock offer that had already been recommended in August.

The final offer represents a 61% premium on the Morrisons share price before the public interest is assumed in mid-June. Some analysts have said the winner may have to sell assets, such as factories, warehouses or stores, to earn a decent return.

CD&R could combine its 918 Motor Fuel Group (MFG) service stations with the 339 owned by Morrisons, opening Morrisons convenience stores at the sites, but this could be subject to close scrutiny by the regulator of the competetion.

Leahy was CEO of Tesco for 14 years until 2011 and will now reunite with Potts and Higginson of Morrisons, two of her closest lieutenants at Tesco.

Potts, who joined Tesco as a 16-year-old stacker, will earn more than £ 10million selling his Morrisons shares to CD&R. COO Trevor Strain will pocket around £ 4million.

Fortress must heal his wounds and consider the cost of the saga. Documents released in July showed Fortress expected bank and advisory fees and expenses of £ 263.5million.

In a statement, Fortress said: “The UK remains a very attractive investment environment in many ways, and we will continue to explore opportunities to help strong management teams grow their businesses and build new business. long-term value. “

In recent months, Sainsbury’s has been raised as another possible target for private equity and investment firms.

($ 1 = 0.7383 pounds)

Reporting by Sarah Young and James Davey; Editing by Kate Holton, Christina Fincher and Catherine Evans

Our Standards: Thomson Reuters Trust Principles.