Top Morrisons investor rejects private equity bid for supermarket

Morrisons directors humiliated as supermarket’s largest shareholder rejects £6.3bn private equity takeover agreed by board

Morrisons directors were humiliated last night as the supermarket’s largest shareholder rejected a £6.3billion private equity takeover agreed by the board. 

In a withering statement, Silchester said that it was ‘not inclined’ to accept the bid from a consortium led by Fortress – because it was too low. 

The group, which owns 15.1 per cent of the supermarket, said ‘there is little in the offer that could not be achieved by Morrisons as a listed company’. 

Humiliated: Silchester’s intervention shamed the Morrisons board – including Andrew Higginson, David Potts (pictured) and Rooney Anand

It also hammered the board for recommending the deal rather than waiting for higher bids. Silchester, a secretive investment company in London, urged bosses to allow more time for further, better offers. 

Its intervention shamed the Morrisons board – including chairman Andrew Higginson, chief executive David Potts and senior non executive director Rooney Anand – after they agreed the takeover and recommended shareholders back the deal. 

The 254p-per-share offer from Fortress was lower than the price commanded by the supermarket’s shares just three years ago, before the pandemic shredded profits. The announcement by Silchester came after the market closed, with shares at 266.1p, suggesting that investors expect a higher bid to follow. 

Rival private equity firm CD&R has had a £5.5billion bid rejected by the board and may come back with an improved offer. 

Fortress bosses need 75 per cent of shareholders to back the deal and may have to stump up more to convince them. Legal & General, the eighth biggest shareholder with a 2.8 per cent stake, says Morrisons should not be taken private for the ‘wrong reasons’. 

Analysts at Canaccord Genuity said shareholders should hold out for 314p per share, or £7.6billion. Other analysts suggest a price of between 270p and 280p. 

The capitulation by the Morrisons board sparked outrage across Westminster and the City, and led to claims that Sir Ken Morrison, whose father founded the grocer, would be turning in his grave. 

Under the terms of the Fortress offer, Morrisons executives look set to share almost £35m in shares and bonuses. Non-executives led by chairman Higginson could bag another £750,000. 

The independent directors were labelled ‘stooges’ for backing the bid. Morrisons said the 254p offer represented a 42 per cent premium to the grocer’s share price of 178p on June 18, the day before the first bid. Silchester’s move is likely to spark a bidding war, with CD&R expected to come back with a higher offer before the deadline of August 9. 

This would disrupt the path to a shareholder vote on the Fortress bid at a general meeting on August 16, where it would require 75 per cent of shareholder votes to be taken private. It is feared a private equity buyer could load the company with debt or sell some of its freehold estate to fund the acquisition, potentially making it more vulnerable to a downturn. 

Fortress has made commitments, which are not legally binding, to honour to preserve the legacy of its founding family. 

But Silchester said Morrisons was already releasing value from its freehold estate and that the core supermarket business is ‘strong and respected’. Last week US private equity firm Apollo Global Management said it would not bid for Morrisons alone, but was looking to join the Fortress consortium. CD&R and Morrisons declined to comment.