Private equity sharks set to snap up Morrisons for £7billion: Bosses in line for a £40MILLION payday

Morrisons bosses are set to scoop a jackpot of almost £40m after accepting a £7bn takeover bid from Clayton, Dubilier & Rice.

The US private equity giant, which is being advised on the deal by Sir Terry Leahy, offered to pay 285p per share for the supermarket group.

This trumped an earlier £6.7bn agreement with Fortress – a private firm owned by the Japanese investment group Softbank.

The deal will land Morrisons’ top dogs tens of millions of pounds.

Chief executive David Potts could make around £22m alone from the sale. The 64-year-old has led the company since 2015.

Chief executive David Potts (pictured) could make around £22m alone from the sale. The 64-year-old has led the company since 2015

Chief executive David Potts (pictured) could make around £22m alone from the sale. The 64-year-old has led the company since 2015

Chief executive David Potts (pictured) could make around £22m alone from the sale. The 64-year-old has led the company since 2015

The amount he will take home depends on whether shares he has been allocated under bonus schemes are paid out – but this is almost always the case during takeovers.

Operations chief Trevor Strain is in line for almost £13m, while finance boss Michael Gleeson could make around £4m.

Chairman Andy Higginson is set for a much cooler £350,000 or so as chairmen are not typically paid in shares and do not accrue stock through bonus schemes.

CD&R unveiled its bid late last night – ahead of a 5pm deadline today to put forward a final offer. But Fortress later came out and said it was considering what to do next. This could see it table an even bigger deal – or drop out of the running entirely.

Operations chief Trevor Strain (pictured) is in line for almost £13m

Operations chief Trevor Strain (pictured) is in line for almost £13m

Finance boss Michael Gleeson (pictured) could make around £4m

Finance boss Michael Gleeson (pictured) could make around £4m

Operations chief Trevor Strain (left) is in line for almost £13m, while finance boss Michael Gleeson (right) could make around £4m

Chairman Andy Higginson (pictured) is set for a much cooler £350,000 or so as chairmen are not typically paid in shares and do not accrue stock through bonus schemes

Chairman Andy Higginson (pictured) is set for a much cooler £350,000 or so as chairmen are not typically paid in shares and do not accrue stock through bonus schemes

Chairman Andy Higginson (pictured) is set for a much cooler £350,000 or so as chairmen are not typically paid in shares and do not accrue stock through bonus schemes

Morrisons was founded as a market stall in Bradford by William Morrison, whose son Sir Ken transformed it into a national grocer within 50 years

Morrisons was founded as a market stall in Bradford by William Morrison, whose son Sir Ken transformed it into a national grocer within 50 years

Morrisons was founded as a market stall in Bradford by William Morrison, whose son Sir Ken transformed it into a national grocer within 50 years

Morrisons shares jump as bidding war heats up with £7billion offer

Morrisons shares have jumped after the bidding war for the supermarket heated up with a £7 billion bid from US private equity firm Clayton, Dubilier & Rice (CD&R). The investment giant announced late on Thursday evening that a deal to buy the Bradford-based retailer has been unanimously agreed by the listed firm’s board. Morrisons directors have advised that shareholders back the latest offer, which values the business at 285p per share.

Shares in the company leapt by more than 4% to 291p in early trading on Monday, suggesting that investors expect the bidding war is likely to continue and a more expensive deal could be struck. The supermarket chain had previously been set for a £6.7 billion takeover by a consortium led by another US private equity firm, Fortress, which owns UK wine retailer Majestic.

The retailer confirmed on Thursday that this agreement has now been withdrawn. Oppidum Bidco – the name of the Fortress-led group – said it is now ‘considering its options’ over whether to field another offer to buy the supermarket group.

It represents the latest stage of a lengthy takeover process that began in June, when CD&aR had an initial £5.5 billion approach rebuffed by Morrisons bosses. In June, the board said the offer ‘significantly undervalued Morrisons and its future prospects’.

In the updated offer document, released at 9pm on Thursday, the company said it ‘recognises the legacy of Sir Ken Morrison, Morrisons’ history and culture, and considers that this strong heritage is core to Morrisons and its approach to grocery retailing’.

The private equity house, which will face less scrutiny than a stock market-listed business, said it ‘will support Morrisons in further building on these strengths’ and suggested it had no plans to sell off its freehold stores. Most supermarkets lease their sites, but Morrisons has famously resisted calls for several years to use sale and leaseback agreements to line the pockets of investors. The City feared CD&R could be planning a similar move. 

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The latest swoop from CD&R means Morrisons, the UK’s fourth-largest supermarket chain, is closer to falling into the hands of private equity.

The London stock market has been raided by private equity and overseas buyers since the Covid crisis began – as it hit the value of listed companies, making them cheaper to buy. The Daily Mail has campaigned for greater transparency in the debt-fuelled sector and for an end to sharp practices.

Private equity often works on a short-term model that aims to restructure a company, chop it up and sell off the parts for a quick profit.

CD&R claims this would not be the case and cites its investment in budget retailer B&M, which Leahy previously chaired, as a case in point.

But it is also feared that a private equity buyout could see Morrisons’ tax base shifted out of the UK – depriving the Treasury of crucial income as the country attempts to pay for the Covid pandemic.

Asda – one of Britain’s ‘Big Four’ supermarket chains that also includes Morrisons – has already fallen into private equity hands after a £6.8bn deal by the Issa brothers and partner group TDR Capital. And its tax base shifted too. Last year it was revealed that Mohsin and Zuber Issa had arranged for Asda to be legally owned in the offshore tax haven of Jersey.

Morrisons was founded as a market stall in Bradford by William Morrison, whose son Sir Ken transformed it into a national grocer within 50 years.

Along the way, the retail tycoon purchased several of his firm’s suppliers to gain greater control over quality and to cut overall costs. It now buys animals and whole crops directly from British farmers and has become the UK’s second-biggest manufacturer of fresh food – making everything from fresh bread to seafood and meat products such as sausages. It even owns a 30-foot fishing trawler called Jacqui A, after buying a Cornish seafood business in March.

This ‘vertically-integrated’ model sets it apart from the rest of the ‘Big Four’ grocers, which do not directly own most of the companies that supply them.

CD&R said: ‘CD&R recognises the legacy of Sir Ken Morrison, Morrisons’ history and culture, and considers that this strong heritage is core to Morrisons and its approach to grocery retailing, and is committed to supporting Morrisons to capitalise on these foundations and to execute successfully the current strategy to deliver both growth and profitability.’

History of Morrisons: From small market stall to supermarket giant

Morrisons was founded in 1899 by William Morrison – an egg and butter merchant – in Rawson Market, Bradford. Back then it was called  Wm Morrison Limited and was a shadow of what it had morphed into.

But in 1952 his son Ken, later Sir Ken, Morrison took over the family firm when he was just 21. The ambitious youngster opened a store in Bradford city centre in 1958 as it began its expansion.

It was the first one to stamp prices on what it was selling – and it also had three checkouts. From here the business boomed and it opened its first supermarket in the city in 1961.

Such was the companies success, Morrisons was listed on the London Stock Exchange in 1967. Moving into the 21st century, the by now established firm bought Safeway for £3.3billion. It meant it had a larger presence in the south of England than before.

In 2008, longstanding Sir Ken retired as the firm’s chairman after a 55-year stint and was made Honorary President. A year later Morrisons bought a 35 Somerfield stores off the Coop as it aimed to have a shop within 15 minutes of every home.

The company opened its first M local shop in 2011 which latest rebranded to ‘My Local’ in 2015. From 2014 the private equity sharks started to loom after it emerged Sir Ken’s children and their 10 per cent share wanted to take the company private.

Sir Ken slammed the way the firm was being run the same year following poor financial performances. He was supported by his nephew Chris Blundell who held the rest of the family stake.

In 2021 a battle to take over the firm by US private equity companies began, with Clayton, Dubilier & Rice and Fortress fighting it out. On August 20, it emerged Morrisons bosses accepted a £7billion takeover bid from Clayton, Dubilier & Rice.

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