Morrisons’ private-equity suitor told to up the ante as backlash continues

City brokers yesterday told Clayton, Dubilier & Rice (CD&R), the international investment firm behind the £5.5bn swoop for the UK’s fourth-largest supermarket, to drastically up its bid from the 230 pence per share indicated last week. 

Experts said that the grocers’ board, led by chair Andy Higginson, would be unlikely to settle for anything less than 280 pence per share – a figure closer to £6.7bn, the same amount EG Group owners the Issa brothers and TDR Capital snapped up rival Asda for in February. 

“Private equity has deep pockets and investors know this,’ one broker told The Daily Mail. “Silchester won’t even begin discussions until there is a premium offer made.

“[Sir Terry] Leahy and CD&R need to get Silchester interested if they are to progress. It will be very interesting to see what they come back with.”

Silchester are the largest individual stakeholder in Morrisons. Legal & General, another large stakeholder, earlier this week criticised the intial expression of interest for significantly undervaluing the business. 

While rumours around the future ownership of Morrisons have been swirling since the bid was first reported over the weekend, CD&R have yet to return with a fresh bid. Nor has the approach seen any other private-investment firms jump at the chance to snap up Morrisons.

US retail giant Amazon has also yet to make a move, despite having an existing wholesale arrangement with the grocer and an increasing interest in taking on the UK’s established and hugely competitive grocery market. 

As the speculation continues to mount, so too has backlash from stakeholders at the thought of the UK’s second-largest food manufacturer and largest customer of British farmers going into international ownership. 

Since Monday, Labour’s shadow minister for business, the head of the shopworkers union and the National Farmers’ Union have all called for some form of intervention.

It has also been widely reported that the cross-party Business, Energy and Industrial Strategy Committee is in the process of writing to the Competition and Markets Authority asking for reassurances. 

In response to the growing clamour, the government issued a statement indicating its broad support for international investment in UK companies. 

“We are committed to ensuring that the UK remains open for business while protecting the livelihoods of British workers and investment in the UK.

“The government recognises that overseas investors play a major and positive role in stimulating economic growth in every part of the UK. In most cases, it is right that mergers are treated as a commercial matter for the parties involved.”

Under UK takeover rules, CD&R has until July 17 to announce a firm intention to make an offer for Morrisons.