Morrisons Share Price Jumps Following Takeover Talks

July 9, 2021

UK supermarket Morrisons saw its share price jump nearly 28% in late June following an offer of purchase from a US conglomerate. The private equity firm offered the company £5.5bn to take over the supermarket, causing shares to close at 228p on the day the offer was made.

Though the supermarket’s top chiefs rejected the offer from the firm, the move has prompted rumours that other large companies may be looking to swoop in and snap up the supermarket for a better price.

Clayton, Dubilier & Rice

New York’s Clayton Dubilier & Rice, one of the world’s oldest private equity companies, proposed the offer.

Upon review of the deal, the Morrisons board said they felt the firm had ‘undervalued’ the worth of the supermarket and the potential for its further growth in the future.

The grocery industry has had a strong year during the COVID-19 pandemic and the turbulence that plagued Morrisons – from disappointing sales numbers to a massive data leak of employee information in 2014.

‘Opening The Floodgates’

Retailer insiders believe that the offer from CD&R will open up the floodgates for further investors to bid for the supermarket.

As per UK law, the private firm has until July 17th to either make a formal bid or abandon the purchase, which would offer 230p per share for the company.

Insiders suggest more attention should be paid to Amazon, with whom Morrisons already has an established relationship selling groceries via their website and on Deliveroo.

As a company, Amazon has often had high ambitions for the food industry but never quite realised them. Some suggest that rumours of a bidding war could prompt them to make a similar deal. There’s also concern about how large investors could negatively impact customers.

Not The First Time

It’s not the first time an American private equity firm has sought to take over one of Britain’s big grocery retailers – Lone Star and Apollo Global Management had both shown interest in buying ASDA, a subsidiary of the American chain Walmart.

A majority stake in ASDA was bought in 2021 by TDR Capital and Issa Brothers, with a valuation of £6.8bn.