US private equity firm Clayton, Dubilier & Rice has beaten the Fortress Investment consortium at auction for Morrisons with a bid of £7bn for the supermarket.
Clayton, Dubilier & Rice (CD&R) bid 287 pence per share – 2 pence per share above their existing offer and just a penny above the 286 pence offered by a consortium led by SoftBank-owned Fortress Investment.
Including debt, CD&R’s bid represented an enterprise value of £9.95bn.
Morrisons’ directors met on Saturday afternoon and unanimously recommended the revised offer. Chair of the supermarket’s board, Andrew Higginson, said it “represents excellent value for shareholders while at the same time protecting the fundamental character of Morrisons for all stakeholders.”
“The Board is confident that Morrisons will continue to go from strength to strength under CD&R’s ownership,” Higginson added.
Sir Terry Leahy, CD&R’s senior adviser and former Tesco boss, said the group was “gratified by the recommendation” and “look forward to the shareholder vote to approve the transaction.”
“We continue to believe that Morrisons is an excellent business, with a strong management team, a clear strategy, and good prospects,” Leahy said.
Shareholders will now be asked to vote on the takeover deal in a special meeting on October 19, and at least three-quarters must approve the deal for the transaction to go ahead.
It brings a months-long heated takeover battle for Britain’s fourth-largest supermarket to an end, after the UK’s takeover watchdog on Wednesday ordered an auction for Saturday to confirm the winning bidder.
The stock market’s Takeover Panel said it would run a bidding process of up to five rounds this weekend because neither of the private equity bidders Clayton, Dubilier & Rice and the Fortress Investment consortium that have been vying for the grocer since June had declared their offers final.
In order to resolve the competition, both bidders had until Saturday to submit a formal increased bid at a fixed price in cash for the first round of the auction.
The end of a long, heated battle
It marks the end of a long, heated battle for the UK’s fourth largest supermarket that began back in June when US private equity group CD&R first made an unsolicited offer of 230 pence per share.
After Morrisons rejected this offer, a trio of private investment groups led by SoftBank-owned Fortress entered the equation with a rival offer of £6.3bn in July.
But shareholders felt this offer was too low, and Fortress made a comeback with an increased offer of £6.7bn in August, which the grocer’s board accepted.
Fortress’ pole position didn’t last long, however, as CD&R returned with a fresh increased bid of £7bn at the end of August, leading to Morrisons’ board withdrawing their support for Fortress and unanimously accepting the original bidder’s.
New York-based firm CD&R is one of the most firmly established investors in the sector and has been advised by former Tesco chief Sir Terry Leahy over the past 10 years.
As it stands, the supermarket’s board is recommending the higher CD&R bid and has called a shareholder meeting for October 19 to approve it.
Both bidders had a deadline of 5pm yesterday to announce that they didn’t intend to raise their bid further, in which case today’s auction would have been scrapped – a similar scenario to the recent takeover battle for inhaler manufacturer Vectura.