Top funds line up against Morrisons supermarket bid

Two of Morrisons’ largest shareholders declare takeover bids from private equity predators too low

Two of Morrisons’ biggest shareholders said last night that private equity predators’ £6.3bn takeover bid was too low.

In a further humiliation for the supermarket group’s board, some of the top 20 investors spoke out against the offer from US giant Fortress.

The comments came just a day after Silchester, Morrisons’ largest shareholder, opposed the 254 pence per share offer and wondered what the Fortress-backed consortium is bringing to the table.

Pushing back: The comments came just a day after Morrisons’ largest shareholder Silchester opposed the 254 pence per share offer

The interventions represent a setback for the board of directors — including chairman Andrew Higginson, chief executive David Potts and senior non-executive director Rooney Anand — after they approved the acquisition with Fortress and recommended shareholders support the deal.

The city is now bracing for a higher offer from Fortress and a possible counter-offer from private equity rival Clayton Dubilier & Rice, rejecting an earlier approach of £5.5 billion. A higher bid would indicate that the board sold out too early.

Fund managers at JO Hambro, Morrisons’ tenth largest shareholder, said the offer approved by the board of directors “does not meet” the 270 pence level they believe “deserves involvement and consideration”.

Another top 20 investor, who declined to be named, also put a price tag of 270 pence per share or £6.8 billion on the grocer.

The fund manager said: ‘I don’t think the price is attractive at all – I won’t accept it. I’m hoping for something better than 270p.

“If companies are taken private, there has to be a premium and Morrison is an undervalued stock.”

Fortress’s offer has already been criticized by Legal & General, Morrisons’ eighth largest shareholder with a 2.8 percent stake, who said the supermarket chain should not be acquired for the ‘wrong reasons’. M&G, another investor, said it was closely monitoring the deal and promised to speak out if it believes shareholders’ interests are at risk.

Fortress yesterday enlisted the power of Singapore’s sovereign wealth fund GIC for its consortium, giving it significant financial firepower. The alliance also eliminated a potential competitor from the race. It remained in talks with another private equity firm, Apollo, which dropped out of the race as a solo bidder last week.

The group is considering whether to increase its offer to win over shareholders at a general meeting scheduled for August 16.

CD&R was also in talks with its advisers as it prepared to raise its £5.5bn offer before the August 9 deadline. Another bidder could also enter the race.

Shares closed at 266p yesterday, meaning the market considers further price increases likely.