Minister backs £6.3bn takeover of Morrisons: Business Secretary Kwasi Kwarteng faces backlash after hailing private equity deal
Kwasi Kwarteng faced a backlash last night after he supported the £6.3billion takeover of Morrisons by private equity.
In a radio interview, the Business Secretary described the deal as ‘a really good prospect’ for the supermarket and suggested it was an example of foreign investment that would create jobs.
But critics warned the comments showed ‘a lack of understanding’ about the predatory buyout industry, which is known for asset-stripping businesses and culling staff to make quick profits.
Business Secretary Kwasi Kwarteng (pictured) described Morrisons’s £6.3bn private equity takeover as ‘a really good prospect’ and suggested it would create jobs
The row came as a shareholder vote on the takeover by US buyout firm Fortress was scheduled for August 16, with documents revealing that bankers, lawyers and advisors will rake in more than £300million in fees.
Kwarteng previously said he was monitoring the deal and had sought a meeting with Morrisons to get assurances.
Advisers to pocket £300m windfall
Bankers, lawyers and advisers stand to rake in more than £300million in fees from the sale of Morrisons, documents revealed yesterday.
Private equity firm Fortress and its consortium are set to incur fees of £263million on the £6.3billion deal. This includes £169million related to financing arrangements.
Another £36million will be paid to brokers and financial advisers, while £17million is being spent on legal costs.
Public relations advisers will get another £800,000. Separately, Morrisons is spending up to £49.6million on experts and brokers.
It is being advised by Rothschild, Shore Capital and Jefferies. Fortress counts HSBC and RBC as advisers, scheme documents said.
But yesterday the Business Secretary appeared to back the sale, telling the LBC radio station: ‘Yeah, it [private equity] sounds scary. But I have always campaigned for a Britain that is open for foreign investment.
‘We will obviously have to wait and see what happens, but I think it is a really good prospect.
‘Morrisons chairman Andy Higginson talked to me about the deal and I said that this is a vote of confidence in the UK.
‘It is not a bad thing if foreigners want to come and buy really good assets in your country.
‘It means you are attracting capital, you are attracting investment, and that creates jobs.’
However, veteran City investment manager Justin Urquhart Stewart warned the private equity firms were ‘not at all long-term investors’.
He added: ‘I am afraid the Business Secretary’s comments are an indication of a lack of understanding of private equity firms. They are only likely to stick around for three years at best – or five if they mess things up.
‘Of course Britain needs to attract overseas investment, but it needs to be the right kind that will create value.
‘Not all private equity is bad but too often firms get hooked on the opiate of deal fees which become their primary purpose in life.’
And Bill Grimsey, the former boss of Iceland, said: ‘Generally private equity investment in retail businesses that were once public are designed to strip assets out and increase profits before the business is flipped.
‘Morrisons is asset-rich because it was a family-owned business and it has been undervalued.
‘I do not think foreign investors are coming to Britain because it is a great place for investment – I think it is because they want to make money. The board should be rejecting the offer. They have turned over and had their tummies tickled too early.’
Fortress and a consortium of other buyers are behind the 254p per share offer, which is being supported by Morrisons bosses.
However, some shareholders have claimed the bid still undervalues the grocer and MPs have raised concerns about the takeover’s potential impact on jobs and the food supply chain.
They are unconvinced by assurances made by Fortress that it will not sell the large amounts of property Morrisons owns or dismantle its food production business.
Luke Pollard, Labour’s shadow environment secretary, said: ‘The Business Secretary risks putting his own free-market ideology above jobs and Britain’s food security.’