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Morrisons strikes $9.5B takeover deal with U.S. private equity group that bettered rival offer

Produce Business reports

Morrisons has agreed to a takeover offer worth £7 billion (US$9.54 billion) from U.S. private equity group Clayton, Dubilier & Rice, dropping its recommendation of a lower bid it had previously accepted from a consortium led by Fortress Investment Group.

Morrisons, which started out as an egg and butter merchant in 1899, said CD&R’s offer is worth 285 pence a share, trumping a 272 pence a share offer, worth 6.7 billion (US$9.1) pounds, from the consortium led by Softbank-owned Fortress.

CD&R’s offer gives the supermarket chain an enterprise value of £9.7 billion once debt is included. Morrisons’ board intends to recommend it unanimously.

The battle for Britain’s fourth-largest grocer after Tesco, Sainsbury’s and Asda, is the most high-profile looming takeover amid a raft of bids and counter bids, reflecting private equity’s appetite for UK public limited companies.

CD&R’s agreed bid represents a 60% premium to Morrisons’ share price before takeover interest emerged in mid-June.

Morrisons’ shares closed on Thursday at 279.2 pence, indicating investors expected a higher offer.

CD&R, which has former Tesco boss Terry Leahy as a senior adviser, had a 5.52 billion pounds proposal rejected by Morrisons on June 17.

Morrisons subsequently recommended a bid from Fortress worth 6.3 billion pounds, which was then raised after major shareholders, including Silchester, M&G and Hambro, indicated they wanted more.

CD&R has committed to retaining Morrisons’ existing management team led by CEO David Potts, and execute its strategy. It said material store sale and leaseback transactions are not planned.

“The Morrisons board believes that the offer from CD&R represents good value for shareholders while at the same time protecting the fundamental character of Morrisons for all stakeholders,” said Chairman Andrew Higginson.



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