Morrisons’ board has recommended acceptance of private equity group CD&R’s takeover offer, marking a likely return to grocery for former Tesco chief executive Sir Terry Leahy.
The recommendation followed an auction on Saturday when CD&R trumped rival bidder Fortress by a penny more per share.
Morrisons chair Andrew Higginson, who is expected to be succeeded in the post by his former colleague Leahy once the transaction is completed, welcomed the deal and said it was unanimously supported by the board.
Leahy acquired legendary status for turning Tesco into the leading grocer and is a former chair of B&M, in which CD&R also invested and supported its growth.
Higginson said the offer “represents excellent value for shareholders while at the same time protecting the fundamental character of Morrisons for all stakeholders”.
He observed: “CD&R have good retail experience, a strong record of developing and growing the businesses in which they invest, and they share our vision and ambition for Morrisons.
“We remain confident that CD&R will be a responsible, thoughtful and careful owner of an important British grocery business. Shareholders will now have the final say and, if the offer is approved, the Board is confident that Morrisons will continue to go from strength to strength under CD&R’s ownership.”
Leahy said: “We are gratified by the recommendation of the Morrisons Board 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.”
Morrisons chief executive David Potts is expected to stay on in his post following the deal.
On Saturday, the Takeover Panel announced that after the bidding, CD&R’s 287p-per-share offer had edged out Fortress’s final offer of 286p per share.
The winning CD&R bid was 2p per share above its 285p-per-share offer, which was recommended to shareholders by the Morrisons board in August. It values Morrisons at around £10bn, including more than £3bn of debt.
However, early reactions from the City implied the auction was seen as a damp squib. Some analysts had expected that bidding could go beyond 300p per share. Shares in the grocery giant closed at 297p per share on Friday.
The deal brings to an end a process that has been dragged out over much of the summer. It first emerged in June that Morrisons’ board had swatted away an unsolicited £5.5bn offer from CD&R.
The winning bid represented a 61% premium to the price of Morrisons’ shares before the bidding war began.
The total transaction value is over 11 times more than the group’s underlying profit for the year to January 2021.
The deal is subject to final approval by shareholders.
Losing bidder Fortress indicated that it was still on the look-out for UK deals. Managing partner Joshua A Pack said: “Morrisons is an outstanding business and we wish the company and all those involved with it the very best for the future.
”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.”
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