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The battle for Morrisons

A vote of confidence in Britain? Or an unsavoury scramble by ‘private equity vultures’?

“You wait 122 years for a bidder then three arrive at once,” said Bryce Elder in the FT. The UK’s fourth-biggest supermarket chain, Wm Morrison, stunned the City last weekend by recommending to shareholders a 254p-a-share takeover – valuing the enterprise at £9.5bn – from US private equity firm Fortress, backed by Koch Industries and a Canadian pension fund. Apollo Global Management, another US buyout specialist, immediately confirmed that it is working on a rival offer. And the original Yankee suitor rejected last month at 230p, Clayton Dubilier & Rice, has until 17 July to come back with an improved bid. This is a resounding “vote of confidence in UK plc”, said The Sunday Times. The sell-off might cause “shudders” to some. But the board has had “reassurance from Fortress that this is no asset-stripping operation or land grab, and that the new owners will be good stewards”. It should be warmly welcomed. 

What nonsense, said Alex Brummer in the Daily Mail. The “speed and naivety” with which the retailer’s “feeble” board approved Fortress’s bid – and believed their vague, unenforceable promises – is “deeply disturbing”. Morrisons has a special place in British life: its “unique ownership model” means it has long supply chains “stretching from farm and fishing fleet to table”. And even by the standards of private equity, the “marauding buccaneers” out to carve up the supermarket – and no doubt flog off its large property portfolio – are unsavoury. Fortress’s backer SoftBank has failed to keep the promises made when buying British chip giant Arm. Koch Industries is one of the US’s most “notorious polluting companies and a backer of eccentric far-right causes”. Apollo is tainted by links to Jeffrey Epstein. The idea that these are the right folk to take on the “rich legacy” of the socially-conscious Sir Ken Morrison is “risible”, said Ben Marlow in The Daily Telegraph. The Government must scrutinise the plan carefully; shareholders should block it. 

It’s clear why Morrisons is popular, said Lex in the FT. Years of Brexit worries have left UK stocks looking cheap, and the grocer offers utility-like cash generation plus significant freehold property, logistics and manufacturing assets that should be easier to exploit under private ownership. There’s speculation a fourth or fifth bidder will emerge, said James Moore in The Independent. “And that Amazon could ultimately end up squashing the lot of them.” This makes the board’s haste in accepting the Fortress offer look idiotic. Sir Ken Morrison will certainly be spinning in his grave at the prospect of “private equity vultures” gobbling up his business. But “goodness only knows how he would respond to the limp capitulation of the people now at the helm”.

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