Morrisons’ shocking £ 5.5bn bid set to spark bidding war

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A bidding war for Morrisons is about to erupt after the supermarket rejected a shocking £ 5.5bn offer from a US buyout firm advised by former Tesco boss Sir Terry Leahy.

Clayton Dubilier & Rice’s (CD&R) proposed takeover of the UK grocer risks being blocked by rival bidders, deal insiders have said, with interest expected to come from US private equity firms Lone Star and Apollo Global Management as well as Amazon, which has a long-standing grocery store deal with Morrisons.

Nick Bubb, an independent retail analyst, said: “There is a possibility that Amazon will interrupt the party and come up with an offer itself. Morrisons cash flow and real estate assets and low valuation are sure to be of interest to private equity players like CD&R. “

Mr Bubb said it was likely a deal could be made between 250 and 260 pence per share, giving Morrisons a price of up to £ 6.3 billion.

Morrisons rejected CD&R’s takeover offer on Saturday night, saying the proposal “significantly undervalues” the company and its “future prospects.” CD&R has until July 17 to make a firm offer.

A former Amazon insider said it would be surprising if he didn’t see Morrisons as a potential takeover target given his existing partnership with the supermarket chain selling its food online.

They said Amazon has already considered expanding its grocery offering in the UK through a partnership with Marks & Spencer and is increasingly exploring opportunities in brick and mortar retail. . The Silicon Valley company owns Whole Foods, which has around 500 stores in the United States but only a handful in the United Kingdom.

Separately, Jon Reily, former Amazon executive and retail expert, said, “Amazon is still not the dominant force in the space that we expected, and other strong brands in the world like Walmart. and Tesco rose to the challenge and reinvented themselves. . “

However, he said a hit for Morrisons by private equity was more likely, as Amazon has not historically engaged in bidding wars.

Insiders in the matter have suggested that competition could prove fierce from private equity firms. One said that very low interest rates combined with high real estate valuations made Morrisons a very attractive proposition for a buyout company. Morrisons has nearly 500 stores, most of which are freehold properties.

They added that interest would likely come from the United States, due to the attractiveness of UK valuations.


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