Morrison shareholders to vote on CD&R takeover offer

Wm Morrison Supermarkets set an October 19 deadline for shareholders to vote on the hotly contested £7bn takeover proposal by US private equity firm Clayton Dubilier & Rice (CD&R). 

Britain’s fourth-largest grocer published documents on Saturday saying when shareholders will decide on what could be the country’s largest take-private deal in a decade. A vote of 75% or more is required for CD&R’s deal to go through. 

But CD&R could still face a late challenge from a consortium led by Fortress Investment Group, which has been pursuing the grocer throughout the summer and hasn’t yet declared whether it’s walking away.

Morrison said in the document that since neither CD&R nor Fortress declared its offer final, “a competitive situation” exists and there will probably be an auction to resolve the matter. It is expected the Takeover Panel, which oversees UK takeover transactions, will announce the terms of the auction process soon. 

The fight for Morrison reflects the continued interest in Britain’s supermarkets after the £6.5bn buyout of Asda, the UK’s third-largest grocer, earlier this year. Private equity investors want to capitalise on the improving fortunes of leading chains after lockdowns triggered a surge of in-store and online grocery spending. 

CD&R is being advised on its bid by Terry Leahy, who used to run Britain’s biggest supermarket chain, Tesco. The private equity firm has made pledges to maintain Morrison’s policy on pay and pensions and support its long-term relationships with British farmers. 

It also promised not to carry out material sales and leasebacks of the grocer’s extensive real estate portfolio. Morrison owns most of its 500 stores as well as 14 factories where it makes much of the food it sells. 

The offer from CD&R will be funded with more than £3.4bn of equity from funds managed by the private equity firm. Debt of about £6.6bn will be provided by bridge loans and revolving credit facilities by Goldman Sachs, Bank of America, Mizuho and BNP Paribas. 

The document shows that CD&R is likely to incur run up £350m in transaction fees. Most relate to financing costs and broking advice. Morrison’s advisory fees are approaching £57m.

CD&R said that in addition to supporting Morrison’s existing pay and pension arrangements, it also agreed to a “comprehensive mitigation package” to provide “additional security and covenant support to the Morrison pension schemes”. Morrison’s pensions have a surplus of more than £700m.

The Fortress consortium includes America’s billionaire Koch family, the Canada Pension Plan Investment Board and Singapore sovereign wealth fund GIC.  

Bloomberg