Wm Morrison Supermarkets plc (MRW)

Morrisons Bidding War Heats Up

Who will win the bidding battle for Morrisons?

Morrisons’ days as a listed company are numbered.

Private money is itching to get its hands on Morrisons (LON: MRW) (MRW), and it’s obvious to see why. The chain has an 87% freehold ownership across its undervalued estate, which is a mouth-watering prospect for any investor, for sure.

Last month, the supermarket came into play after refusing a £5.5bn takeover bid by American private equity group Clayton, Dubilier & Rice (CD&R), saying the offer was “far too low”.

Since then, an additional two private equity firms have shown interest to buy the fourth-largest chain of supermarkets in the United Kingdom. Morrisons, founded in 1899, operates 500 stores and has a workforce of roughly 118,000.

Over the weekend, the supermarket group announced it had accepted a bid by private equity firm Fortress and its partners. Fortress, Canada Pension Plan Investment Board and the billionaire US Koch family teamed up to fund the offer, which values Morrisons, including all debt, at £9.5bn.

The Morrisons share price jumped just shy of 12% at the open on Monday after Apollo, a New York-based private equity group, announced it was planning to add an offer to the table just two days after the supermarket chain had accepted an offer from rivals Fortress. Apollo last year missed out on buying Morrisons rival Asda.

Apollo’s announcement has increased the hopes of a bidding war and this was enough to send the Morrisons share price to 267.5p as investors anticipate further incoming bids.

Although the Morrisons board confirmed that it had accepted the Fortress offer, the potential deal still needs to be put in front of shareholders who will ultimately decide Morrisons’ fate, but with the possibility of more generous offers on the way, this could sway shareholders to stay put as the bidding war begins to heat up.

If approved, the bid led by Fortress will be the largest private equity deal since the £11bn takeover of Boots by KKR in 2007.

It will be interesting to see if Amazon, a key Morrisons’ partner, shows interest. Morrisons’ supply deal with Amazon could be a significant factor in what is shaping up to be the biggest takeover battle of the summer. Amazon could buy Morrisons to turbocharge its offering in Britain’s food business.

Not Investment Advice Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.

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