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Morrisons to likely kickoff a bidding war after rejecting £5.5bn offer

Morrisons to likely kickoff a bidding war after rejecting £5.5bn offer

Morrisons, Great Britain’s fourth largest grocer, has reportedly raised concerns that it might trigger a bidding war after rejecting an unsolicited £5.5 billion private equity offer for its takeover. It has also raised concerns that other of Britain’s supermarket groups could likely be sold to private equity.

Last week, Morrisons stated that it had declined a preliminary takeover offer worth just more than £5.5 billion. Renowned U.S. firm Clayton, Dubilier & Rice, had made the unsolicited offer and had proposed to pay approximately 230p per share in cash. On Friday, before the offer was made, Morrisons’ shares closed at approximately 178.45p, which valued the grocer at more than £4.3 billion.

Similar to its larger Tesco, shares of Morrisons are below their respective pre-pandemic levels after profits have sharply fallen over the past year. A major reason for this slump is higher costs; caused by the coronavirus crisis cancelling out any benefits from elevated sales.

According to the Bradford-based grocer, its board has unanimously concluded that CD&R’s conditional proposal undervalued Morrisons as well as its future prospects significantly. The conditions of the proposal included debt financing arrangement and completion of the detailed due diligence. Now, the New York-headquartered company would have until 17th of July to make a better offer or just walk away.

CD&R, on its part, declined to make any official comment on whether it intends to come back to Morrisons with a bigger bid. However, analysts claim that its offer was probably one of the first of numerous overtures. The analysts stated that the property assets and cashflows of Morrisons, along with other supermarket groups, have made them highly attractive prospects for private equity players.

For the uninitiated, private equity enterprises have taken over more UK firms over the last year and a half than at any time after the financial crisis within a £52 billion deal frenzy. As per latest data from Dealogic, this has raised fears of job losses and ‘asset stripping’.

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Sunil Jha

Sunil Jha has been a part of the content industry for close to two years. Having previously worked as a voice over artist and sportswriter, he now focuses on writing articles for, across a slew of topics, ranging from technology to trade and finance. With a business-oriented educational background, Sunil brings forth the expertise of deep-dive research and a strategic approach in his write ups.