Morrisons has agreed a takeover offer from a new US investment group led by the owner of Majestic Wines valuing the British supermarket group at £6.3billion.
Shareholders will receive 254 pence a share, comprising 252 pence in cash and a 2 pence cash dividend as a result of the deal by the trio of private investment groups led by Fortress.
The offer, branded the ‘biggest shakeup in the UK grocery sector for over a decade’, exceeds the £5.52billion proposal from US private equity firm Clayton, Dubilier & Rice, which Morrisons rejected on June 19, saying it was far too low.
The deal was struck by Softbank-owned Fortress, Canadian pension fund CPPIB and a unit of Koch Industries, America’s largest private company.
Koch Industries was started by Fred C. Koch who developed a cracking method to refine crude oil into gasoline.
His four sons, known as the Koch brothers, expanded its interests into chemicals, energy and finance and its total revenue in 2019 totaled £83billion.
The Koch family has been among the biggest donors to the US Republican party since the 1980s and has had a major influence on US politics.
Fortress has invested in grocery retail in both North America and Europe, and has invested in Majestic Wine in the UK.
In the US, Fortress has invested in the grocery industry, petrol forecourt stations and retail and restaurants.
Morrisons has agreed a takeover offer from a new company owned by funds managed or advised by affiliates of Fortress Investment Group
The deal was struck by Softbank-owned Fortress, Canadian pension fund CPPIB and a unit of Koch Industries, America’s largest private company. Pictured: David Koch, right, with older brother Charles, left, on Morning Joe in November 2015
Morrisons, which trails UK market leader Tesco, Sainsbury’s and Asda in annual sales, said the offer represents a premium of 42 per cent to its closing share price of 178 pence on June 18 – the last business day before CD&R’s proposal.
Shares in Morrisons closed on Friday at 243 pence, valuing the business at £5.8billion.
Fortress is a global investment manager with about £38billion in assets under management as of March.
Morrisons said an initial unsolicited proposal was received from Fortress on May 4 at 220 pence a share. This offer was not made public.
Fortress then made four subsequent proposals before its offer reached a total value of 254 a share on June 5.
According to the announcement, the deal also includes £3.2 billion in debt, which makes the total operation worth £9.5 billion with debt recovery.
Andrew Higginson, chairman of Morrisons, said: ‘The Morrisons directors believe that the offer represents a fair and recommendable price for shareholders which recognises Morrisons’ future prospects.
Morrisons said an initial unsolicited proposal was received from Fortress on May 4 at 220 pence a share
‘Morrisons is an outstanding business and our performance through the pandemic has further improved our standing and enabled us to enter the discussions with Fortress from a hard-won position of strength.
‘We have looked very carefully at Fortress’ approach, their plans for the business and their overall suitability as an owner of a unique British food-maker and shopkeeper with over 110,000 colleagues and an important role in British food production and farming.
‘It’s clear to us that Fortress has a full understanding and appreciation of the fundamental character of Morrisons.
‘This, together with the very clear intentions they have set out today, has given the Morrisons directors confidence that Fortress will support and accelerate our plans to develop and strengthen Morrisons further.’
Joshua A Pack, managing partner of Fortress, said: ‘We believe in making long-term investments focused on providing strong management teams with the necessary flexibility and support to execute their strategy in a sustainable and value-enhancing manner.
Since the 1980s, Koch brothers Charles (pictured) and David Koch have used their enormous fortune to bankroll their own conservative political machine
‘We fully recognise Morrisons’ rich history and the very important role Morrisons plays for colleagues, customers, members of the Morrisons pension schemes, local communities, partner suppliers and farmers.
‘We are committed to being good stewards of Morrisons to best serve its stakeholder groups, and the wider British public, for the long term.’
Seema Malhotra, Labour’s shadow minister for business and consumers, said: ‘Britain’s supermarkets provide an essential national service and the Covid crisis has highlighted their importance to customers, communities and our retail and farming industries.
‘Any takeover bid must therefore be closely scrutinised by the Government.
‘Ministers must urgently work with Morrisons and the consortium to ensure that crucial commitments to protect the workforce and the pension scheme are legally binding, and met.
‘Ministers must also ensure legal promises are made about the integrity and future of the business, including any impact on the supply chain and distribution centres.’
Richard Lim, chief executive of research consultancy Retail Economics said: ‘This signals the biggest shakeup in the UK grocery sector for over a decade.
‘The grocery sector is transitioning through a period of enormous change as the impact of the pandemic has shifted buying behaviour.
‘Navigating the fast-paced change in market dynamics, customer behaviour and the pressures on the food supply chain in a post-Brexit environment will be no easy feat.
‘Success will hinge on the new owners gaining the support of experienced key members of the leadership team to execute on the future strategy.
‘This will be critical given the pace of change sweeping through the industry.’
Since the 1980s, Koch brothers Charles and David have used their enormous fortune to bankroll their own conservative political machine, creating a vast empire of organisations and advocacy groups.
But they became a target for Democrats who criticised their influence on US politifcs.
Environmental activists have frequently admonished the pair for funding political campaigns that focused on rolling back environmental regulations and being the primary sponsors of climate change denial in the US.
Koch Industries has paid millions in penalties and fines for oil spills, discharging toxic chemicals and violating other environmental regulations.
According to advocacy group Good Jobs First, the company has paid more than $749million in environmental violations since 2000.
The Koch brothers advocated for reduced government spending and limited involvement in wars overseas, and analysts believe they helped give rise to the Tea Party movement.
In a Weekly Standard interview in 2011, David Koch called then-President Barack Obama ‘the most radical president we’ve ever had as a nation’ and accused him of having ‘done more damage to the free enterprise system and long-term prosperity than any president we’ve ever had’, reported CNBC.