Green light for private equity dive into Morrisons supermarket

Competition and market authority admits it can’t contest £6.3bn deal: green light for private equity dives into supermarket Morrisons

  • Morrisons’ £6.3bn takeover by Fortress came a step closer after competition watchdog paved the way for the deal
  • The private equity-led consortium revealed that the CMA had confirmed it will not intervene if shareholders vote on the 254 pence per share offer until next month.
  • The supermarket’s board has already backed Fortress’ offer, meaning shareholders are now the last line of defense against the controversial takeover

Fortress’s £6.3bn takeover of Morrisons came a step closer after the competition watchdog paved the way for the deal.

The private equity-led consortium announced yesterday that the Competition and Markets Authority (CMA) has confirmed that it will not intervene if shareholders vote on the 254 pence per share offer until next month.

The supermarket’s board has already backed Fortress’ offer, meaning shareholders are now the last line of defense against the controversial takeover.

Sign off?: The CMA had been urged by MPs to intervene, but watchdog chief Andrea Coscelli warned the body lacked the powers to intervene

The CMA had been urged by MPs to intervene, but the watchdog chief Andrea Coscelli warned the body did not have the powers to intervene.

In a letter to the corporate selection committee, Coscelli expressed concerns about private equity acquisitions, particularly job losses and the prospect of lower taxes on the treasury.

But he added there was no evidence that the Morrisons deal was highly leveraged and would therefore collapse or that it would hurt competition in the UK.

Fortress’ only other store assets in the UK is Majestic Wines, which has 190 stores in the UK.

Coscelli, the watchdog’s chief executive since 2016, said: “Private equity acquisitions can be highly leveraged, which can make the target companies more vulnerable to failure.”

But he added: “The CMA would need to demonstrate that the levels of debt incurred as a result of the acquisition are such that the target is likely to fail after the merger, or at the very least its financial position would be affected by such a takeover.” . to the extent that it would become a significantly weaker competitor.”

Darren Jones, chairman of the corporate selection committee, said Coscelli’s response suggested that “the government continues to raise questions about whether the appropriate regulatory checks and balances are in place to ensure consumers, workers and retirees are protected in key areas.” takeovers’. Ministers have the power to intervene based on national security, media plurality, the stability of the UK’s financial system and to prevent public health emergencies – but it is rare that they use these powers .

Morrisons seems more vulnerable than ever, but there is hope shareholders can still step in and save the day by voting against the deal.

This week, five investors, who together own 22 percent of Morrisons’ shares, publicly denounced the offer, casting doubt on a successful takeover.

Legal & General, the eighth largest investor in the company, has warned that the supermarket chain should not be taken private for the ‘wrong reasons’.

While Silchester, the group’s largest shareholder, also said that “there is little in the offer that Morrisons as a publicly traded company could not deliver”.

The consortium led by Fortress must get the support of 75 percent of the shareholders to get their hands on the supermarket.

Analysts have suggested 270p to 280p could be enough to close the deal, although prices of up to 314p, or £7.8bn, have been suggested.

Both CD&R and Fortress, which includes Singapore’s sovereign wealth fund, have enough firepower to increase their bids if necessary, but weigh up how much to bid.

Shares of Morrisons rose again yesterday, up 1.1 percent, or 3p, to 267.6p, suggesting that the market expected Fortress, or rival private equity bidder Clayton Dubilier & Rice (CD&R), to bid a higher price .

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