Major investor LGIM calls for more detail on Morrisons property portfolio before voting on takeover
Legal & General Investment Management (LGIM), one of Morrisons’ biggest shareholders, has called for more detail on Morrisons’ property portfolio before it votes on a private equity takeover bid.
Over the weekend Morrisons accepted a £6.3bn takeover offer by a consortium of funds led by private equity firm Fortress.
But this morning rival Apollo said it was “in the preliminary stages of evaluating a possible offer” for the supermarket – raising the possibility of a protracted takeover battle.
In response, Morrisons’ share price leapt 11.3 per cent soon after the market open, meaning its share price has gone up nearly 51 per cent in the last month since news broke that private equity firms were gearing up to bid on the supermarket chain.
The supermarket chain’s board has already rejected an earlier £6bn bid by a different firm, saying it undervalued the business.
It will be Morrisons’ shareholders who ultimately decide whether the takeover goes ahead, and now LGIM, a major shareholder, has called for more information, specifically wanting to see details of Morrisons’ property portfolio in order to make an informed decision on voting for the deal.
Legal & General Investment Management senior fund manager Andrew Koch said: “As the Morrisons situation evolves it is leading to more questions than answers. The company has thus far disclosed little information about the current value of its properties, both the retail stores and the distribution assets.
“Given this is an agreed bid, it is likely that Fortress and their partners have had more information than others on this. Investors need to have the detailed figures to be able to make a considered decision regarding the right future for the company and their shareholdings.
“As responsible stewards of our clients capital, it is important that the company isn’t taken over for the wrong reasons. If an acquirer makes strong returns this should come from making the company a better business. It should not come from buying its property portfolio too cheaply, levering the company up with debt, and potentially reducing the tax paid to the Exchequer.”
Morrisons has a large property portfolio, which is appealing to potential buyers.
Meanwhile abrdn CEO Stephen Bird described the takeover bid as “good value”.
“I think the Morrisons deal is good value, I think it’s a smart thing to do,” he told Reuters.
Fortress, which for now is in pole position in the war for Morrisons, has promised it won’t make changes to staff benefits provided via the pension scheme.
In an update issued this morning, Fortress and co pledged to recognise “the legacy of Sir Ken Morrison”, as well as the firm’s culture.
Fortress, which has also invested in wine shop Majestic Wine, said existing employment rights, including the pension rights of Morrisons’ management and employees will be safeguarded, as well as the supermarket’s commitment to pay all employees at least £10 per hour.
MPs had previously called on any Morrisons bid from private equity to be scrutinised to protect employees and their pensions.
The private equity consortium said it viewed the UK grocery retail sector as a long-term opportunity, and that it was impressed with the financial performance of Morrisons, both prior and during the pandemic.
Andrew Higginson, chairman of Morrisons, said: “It’s clear to us that Fortress has a full understanding and appreciation of the fundamental character of Morrisons.
“This, together with the very clear intentions they have set out today, has given the Morrisons directors confidence that Fortress will support and accelerate our plans to develop and strengthen Morrisons further.”