Morrisons sale: US firm CD&R wins £7bn auction for supermarket

Private equity business narrowly beats rival Fortress with offer that rises to £9.97bn when including debt

Last modified on Sat 2 Oct 2021 09.18 EDT

The US private equity firm Clayton, Dubilier & Rice (CD&R) is set to become the new owner of Morrisons after tabling a £7bn bid in a tense auction for the British supermarket chain.

The 287p a share bid narrowly beat the 286p offer by a consortium led by Softbank-owned Fortress Investment Group on Saturday, in a showdown to settle Morrisons’ future.

It is understood the auction, which could have lasted up to five rounds, was cut short after the third round of bids, when both parties put forward their final offers. The total value of CD&R’s offer, when including debt, totalled £9.97bn.

The auction effectively ends a four-month battle for the grocer, which has dragged on since CD&R, which is being advised by the former Tesco chief executive Sir Terry Leahy, first made an approach in June.

The Morrisons board planned to meet on Saturday afternoon to discuss the results of the auction, but will have until 7am on Tuesday to formally back their preferred bid. Technically, there is no guarantee that the highest offer will gain their approval, given there are additional considerations including pledges to fund and support the Morrisons pension scheme.

However, Fortress admitted defeat on Saturday afternoon, with its managing partner Joshua Pack saying he wished the company and all those involved “the very best for the future”.

He added: “The UK remains a very attractive investment environment from many perspectives, and we will continue to explore opportunities to help strong management teams grow their businesses and create long-term value.”

CD&R’s pre-auction offer of 285p had already gained the support of the Morrisons board, having promised that the company’s head office would remain in Bradford and confirmed there were no plans to sell off its store estate to raise cash.

The private equity firm also said it was fully supportive of Morrisons’ recent pay award of at least £10 an hour for all colleagues in stores and manufacturing sites, and had reached a deal with pensions trustees in mid-September to provide additional security and support to the scheme, which has 53,600 members. Fortress was reportedly in talks with pension trustees on Friday in an attempt to clinch a similar agreement ahead of the auction.

Unions and politicians have been anxious about the wave of private equity takeovers aimed at UK firms, amid concerns companies would be stripped of their property holdings, loaded up with debt, and worker conditions would deteriorate.

Morrisons employs about 120,000 staff in the UK, including across its 497 supermarkets, as well as factories, farms and a company-owned fishing trawler.

Saturday’s auction, which was managed by the City’s Takeover Panel that oversees the process for mergers and acquisitions in the UK, was triggered after neither bidder declared final offers over the last four months. In order to avoid a draw, Fortress had been asked to put forward a final bid with an “even” number of pence, while CD&R was told to offer a bid with an “odd” number.

Shareholders will vote on the offer on 19 October.

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