US private equity giant Clayton, Dubilier & Rice (CD&R) – which owns the UK’s biggest independent forecourt group MFG – is now the front runner in a bidding war to take over Morrisons.
CD&R has agreed a £7bn cash offer for supermarket group with Morrisons’ directors, topping the previous highest bid of £6.7bn from a consortium led by Fortress Investment Group, which was due to be put to a shareholders’ meeting on August 27.
CD&R initiated the takeover battle for Morrisons with a £5.5bn bid for the company in June, which was rejected.
This was followed by a higher bid from the Fortress consortium on July 3, and this was increased to £6.7bn on Aug 6.
Following the latest bid Morrisons’ directors released a statement saying they intended to recommend unanimously the CD&R offer to a meeting of shareholders to be convened as soon as is reasonably practicable, which is expected to be a date in or around the week commencing 4 October.
They added that as a result they were withdrawing their previous recommendation of the Fortress offer and adjourning the meeting scheduled for August 27.
Following the latest announcement the Fortress-led consortium said it was considering its options and urged Morrisons’ shareholders to take no action.
Commenting on the CD&R offer, Andrew Higginson, chair of Morrisons, said: “The Morrisons board believes that the offer from CD&R represents good value for shareholders while at the same time protecting the fundamental character of Morrisons for all stakeholders.
“CD&R have a strong record of developing, strengthening and growing the businesses that they invest in and they share our vision for Morrisons’ future.
“This, together with the strong set of intentions that they have set out today, gives the Morrisons board confidence that CD&R will be a responsible, thoughtful and careful owner of an important British grocery business.”
Former Tesco boss Sir Terry Leahy, who is senior adviser to CD&R funds, said: “CD&R is delighted to have the opportunity to support the management of Morrisons in executing their strategy to grow and develop the business.
“The grocery sector in the UK is undergoing great change and we believe Morrisons is well placed, with CD&R’s support, to succeed in this environment. CD&R values Morrisons’ distinctive business model and is committed to supporting it, including the successful ESG and broader stakeholder engagement strategies of the company that are essential to its continued success.”
In the statement outlining its bid CD&R made no mention of any synergies that might be achieved with MFG, or of Morrisons 338 petrol filling stations.
However, if CD&R does take over Morrisons there has been speculation that it would open convenience stores on MFG’s forecourts, which would have major implications for the forecourt sector.
MFG is currently a major retail partner with Tesco-owned Booker, which supplies hundreds of its Londis and Budgens stores on MFG sites. Whether Booker would wish to carry on working with a company so closely allied to Morrisons must be open to question.
Also, a previous trial partnership between Morrisons and MFG five years ago was quickly abandoned. MFG piloted five Morrisons stores at the end of 2016, but the project only lasted a few months before it was discontinued.
Since then Morrisons has been working closely with other leading forecourt groups such as Rontec, which has more than 60 Morrisons Daily stores across its estate, and MPK.
A successful bid would also intensify competition with MFG’s biggest rival, EG Group, whose owners recently took over Asda.
There may also be implications for the 900-strong MFG estate. EG Group agreed to divest 27 service stations to overcome concerns by the Competition and Markets Authority (CMA) that the takeover could affect competition in some local road fuel markets.