The battle for Morrisons
A vote of confidence in Britain? Or an unsavoury scramble by ‘private equity vultures’?
When Andy Higginson’s phone flashed up with an old colleague’s name, it was clear to the Morrisons chairman “that it wasn’t going to be a catch-up about the good old days”, said Ashley Armstrong in The Times. Sir Terry Leahy, the former Tesco boss turned partner at US private equity firm Clayton, Dubilier & Rice, was delivering “a courtesy call” to alert him to a takeover bid. The £5.5bn offer (more than £8.7bn including debt) has put Britain’s fourth largest supermarket “in play”. In response, Morrisons shares “leapt by 35%” to over 240p – suggesting that investors are expecting “something tastier from the private equity outfit than its 230p sighting shot”, said Alistair Osborne in the same paper. There’s “no better place than a supermarket for a food fight. But how much of a scrap is CD&R up for?”
The attempted raid – which, if successful, would “mark one of Britain’s biggest leveraged buyouts since the 2008 crisis” – has sparked “a furious row” in the City, said the FT. Over the last “frenzied” six months, private-equity dealmakers “have announced bids for UK-listed companies at the fastest pace in more than two decades”, triggering a fierce dispute between “traditional fund managers”, who reckon they’re getting the goods far too cheaply, and “bullish dealmakers” sitting on huge pots of cash”.
Britain’s corporate boards are caught in the middle. Let’s hope the Morrisons board puts up some resistance, said Nils Pratley in The Guardian. “Now that Asda has been bought via a similar leveraged model, and with takeover speculation swirling around Sainsbury’s”, 40% of the UK’s grocery market could end up under the control of financial owners – “a disaster” for “the poor old shopper”. Private equity houses don’t do price wars. “Gently rising profit margins, wrung from customers by stealth, are far better for making the debt repayments.”
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
This is actually “a property deal, not a retail one”, said Lex in the FT. Bradford-based Morrisons owns 85% of its 500 stores. Selling, then leasing back, just a quarter of those would raise “a quick return on investment” of £2bn. Shareholders should hold out for at least 280p. What makes the deal so significant is Morrisons’ “critical role in Britain’s food production”, said Alex Brummer in the Daily Mail. Its 18 food production centres source mostly from British farms, and are “responsible for some 25% of the UK’s food production”. The farm lobby has “bleated endlessly about the threat of the Aussie trade deal”. They’ll have “much more to worry about” if a private equity firm, with heavy debts and no long-term responsibilities, grabs hold of Morrisons.
Create an account with the same email registered to your subscription to unlock access.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
'Good riddance to the televised presidential debate'
Instant Opinion Opinion, comment and editorials of the day
By Harold Maass, The Week US Published
-
Caitlin Clark the No. 1 pick in bullish WNBA Draft
Speed Read As expected, she went to the Indiana Fever
By Peter Weber, The Week US Published
-
Today's political cartoons - April 16, 2024
Cartoons Tuesday's cartoons - sleepyhead, little people, and more
By The Week US Published
-
Shein: could the year’s mega-IPO fall apart at the seams?
Talking Point Latest hitch is a pre-float 'security review' that could deter potential investors
By The Week UK Published
-
Labor market strong as inflation sinks
Feature And more of the week's best financial insight
By The Week US Published
-
Midair blowout: another black mark for Boeing
Feature This isn't the first production issue Boeing has encountered
By The Week US Published
-
Behemoths of the seas
The Explainer Cruise liners keep getting bigger, with the world’s largest 'megaship' ever built set to make its maiden voyage this month.
By The Week Staff Published
-
Holiday season: Fed optimism cheers investors
Feature The feds believe their 'pivot' will make a recession unlikely
By The Week US Published
-
Older workers stay in the labor force
Feature And more of the week's best financial insight
By The Week Staff Published
-
America's most in-demand job
Feature And more of the week's best financial insight
By The Week US Published
-
Currency: the long reign of the mighty dollar
Feature Argentina is planning to drop the peso in favor of the US dollar
By The Week US Published