Fortress to buy Wm Morrison for $8.7b

Bloomberg

Fortress Investment Group agreed to buy Wm Morrison Supermarket Plc for about 6.3 billion pounds ($8.7 billion), trumping an earlier bid from Clayton Dubilier & Rice.
The all-cash agreement by a group led by Fortress, a SoftBank Group Corp subsidiary, follows the UK supermarket chain’s rejection of CD&R’s 5.5 billion-pound offer last month. It’s the latest in a flurry of merger activity in the British retail sector in the past few years.
“The Morrison directors believe that the offer represents a fair and recommendable price for shareholders which
recognises Morrison’s future prospects,” the grocer’s chairman, Andrew Higginson, said in a statement.
Within a highly competitive, low-margin market, UK grocery stores are grappling with the rise of online shopping as well as challenges from German discounters Aldi and Lidl, though they’ve weathered
the pandemic better than other retailers.
Under the terms announced in the statement, for each Morrison share, holders will receive 252 pence in cash and a 2 pence special dividend.
The offer represents a premium of about 42% to the closing price of 178 pence per Morrison share as of June 18, the final day of trading before the start of the offer period,
and a 41% premium to the volume-weighted average closing price of 180 pence per share for the three-month period ended on June 18.
Investors are seeking to capitalise on grocers’ improving fortunes after lockdowns triggered a surge in in-store and online grocery spending. Because they were allowed to stay open as essential retailers, Morrison and competing UK supermarkets including Tesco Plc and J Sainsbury Plc have fared better than other stores.
Private equity investors have targeted the sector, with Britain’s third-largest grocer, Asda Group Ltd, taken over by TDR Capital and the Issa brothers in a 6.5 billion-pound deal.

Walmart Inc, the US retailer which owned Asda since 1999, retains a minority stake. The Asda transaction came two years after regulators blocked Walmart’s a previous attempt to sell the business to the UK grocer’s bigger rival, Sainsbury.
Takeovers of British supermarkets isn’t without its critics. U.K. lawmaker Darren Jones wrote to Andrea Coscelli, chief executive of the Competition and Markets Authority, to ask whether regulators have the powers “to intervene when new owners act irresponsibly.”
Labor MP Jones, chair of the business, energy and industrial strategy select committee, cited worries about what buyouts “might mean for the protection of jobs, pension funds and supermarkets presence on British high streets.”
Fortress, whose other U.K. retail assets include Majestic wine stores, said it intends for Morrison to continue to operate as a standalone business with its head office remaining in Bradford, England, and led by its current management team. In its statement, the firm also pledged to stand by recent pay increases, pensions and arrangements with suppliers.
Fortress Investment Group agreed to buy Wm Morrison Supermarket Plc for about 6.3 billion pounds ($8.7 billion), trumping an earlier bid from Clayton Dubilier & Rice.
The all-cash agreement by a group led by Fortress, a SoftBank Group Corp subsidiary, follows the UK supermarket chain’s rejection of CD&R’s 5.5 billion-pound offer last month. It’s the latest in a flurry of merger activity in the British retail sector in the past few years.
“The Morrison directors believe that the offer represents a fair and recommendable price for shareholders which recognises Morrison’s future prospects,” the grocer’s chairman, Andrew Higginson, said in a statement.
Within a highly competitive, low-margin market, UK grocery stores are grappling with the rise of online shopping as well as challenges from German discounters Aldi and Lidl, though they’ve weathered the pandemic better than other retailers.
Under the terms announced in the statement, for each Morrison share, holders will receive 252 pence in cash and a 2 pence special dividend.
The offer represents a premium of about 42% to the closing price of 178 pence per Morrison share as of June 18, the final day of trading before the start of the offer period, and a 41% premium to the volume-weighted average closing price of 180 pence per share for the three-month period ended June 18.
Investors are seeking to capitalise on grocers’ improving fortunes after lockdowns triggered a surge in in-store and online grocery spending. Because they were allowed to stay open as essential retailers, Morrison and competing UK supermarkets including Tesco Plc and J Sainsbury Plc have fared better than other stores.
Private equity investors have targeted the sector, with Britain’s third-largest grocer, Asda Group Ltd, taken over by TDR Capital and the Issa brothers in a 6.5 billion-pound deal. Walmart Inc, the US retailer which owned Asda since 1999, retains a minority stake. The Asda transaction came two years after regulators blocked Walmart’s a previous attempt to sell the business to the UK grocer’s bigger rival, Sainsbury.
Takeovers of British supermarkets isn’t without its critics. U.K. lawmaker Darren Jones wrote to Andrea Coscelli, chief executive of the Competition and Markets Authority, to ask whether regulators have the powers “to intervene when new owners act irresponsibly.”
Labor MP Jones, chair of the business, energy and industrial strategy select committee, cited worries about what buyouts “might mean for the protection of jobs, pension funds and supermarkets presence on British high streets.”
Fortress, whose other U.K. retail assets include Majestic wine stores, said it intends for Morrison to continue to operate as a standalone business with its head office remaining in Bradford, England, and led by its current management team. In its statement, the firm also pledged to stand by recent pay increases, pensions and arrangements with suppliers.