Morrisons agrees to £6.3bn Fortress takeover offer

The board of Morrisons said on Saturday it has agreed to a takeover offer from a trio of investors led by Fortress Investment Group which values the share capital of the Bradford-based supermarket giant at £6.3 billion.

Under the terms announced in Saturday’s statement, Morrisons shareholders, who must approve the deal, would receive £2.52 in cash and a 2p special dividend for each Morrisons share.

The £2.54-per-share cash offer exceeds an earlier £5.5 billion cash takeover approach from US private equity firm Clayton, Dubilier & Rice (CD&R) pitched at £2.30 a share, which Morrisons rejected.

Fortress, an independently-operated subsidiary of SoftBank Group, is backed in the deal by the Canada Pension Plan Investment Board (CPP Investments) and Koch Real Estate Investments.

The Fortress-led offer represents a premium of 42% to the closing price of £1.78 of Morrisons shares on June 18, 2021, before the approach from CD&R.

The deal would value Morrisons at £9.4 billion after including net debt and leases worth £3.2 billion.

Morrisons chairman Andrew Higginson said: “The Morrisons directors believe that the offer represents a fair and recommendable price for shareholders which recognises Morrisons’ future prospects.

“Morrisons is an outstanding business and our performance through the pandemic has further improved our standing and enabled us to enter the discussions with Fortress from a hard-won position of strength.

“We have looked very carefully at Fortress’ approach, their plans for the business and their overall suitability as an owner of a unique British food-maker and shopkeeper with over 110,000 colleagues and an important role in British food production and farming.

“It’s clear to us that Fortress has a full understanding and appreciation of the fundamental character of Morrisons.

“This, together with the very clear intentions they have set out today, has given the Morrisons directors confidence that Fortress will support and accelerate our plans to develop and strengthen Morrisons further.

“Fortress, CPP Investments and KREI all have strong track records and a long-term approach to investing.

“They are backing our strategy, our management and our people.

“Morrisons has a rich history and a special culture and I am convinced that with the long term support of Fortress, the business will continue to prosper in the future.”

Fortress managing partner Joshua Pack said: “We believe in making long-term investments focused on providing strong management teams with the necessary flexibility and support to execute their strategy in a sustainable and value enhancing manner.

“We fully recognise Morrisons’ rich history and the very important role Morrisons plays for colleagues, customers, members of the Morrisons Pension Schemes, local communities, partner suppliers and farmers.

“We are committed to being good stewards of Morrisons to best serve its stakeholder groups, and the wider British public, for the long term.”

Fortress has about $53 billion of assets under management. CPP Investments manages £287 billion of assets.

Fortress said it intends for Morrisons to continue to operate as a standalone business, with its head office and head office functions remaining in Bradford, led by the Morrisons management team.

Fortress confirmed that the existing employment rights, including existing pension rights of the management and employees of Morrisons, will be “fully” safeguarded.

In particular, Fortress said it is “fully supportive of Morrisons’ recent pay award of at least £10 an hour for all Morrisons colleagues in stores and manufacturing sites, which Fortress views as an important and appropriate recognition of their contribution to Morrisons.”

The Fortress group said it does not intend to make any change to the benefits provided by the Morrisons Pension Schemes.

On the large Morrisons property portfolio, Fortress said it recognises “the flexibility and control that freehold real estate ownership affords both management teams and shareholders.”

Fortress said it appreciates that Morrisons management takes an active approach to managing Morrisons’ store portfolio and has undertaken certain property disposal programmes historically.

Under its ownership, Fortress said “would expect to engage with Morrisons management on its long-term plans for managing the estate, but does not anticipate engaging in any material store sale and leaseback transactions.”

Fortress’ existing portfolio company, Majestic Wine, retains ownership of a significant freehold store estate and has not sold any of its freehold or long leasehold properties under Fortress’ ownership.

Once Morrisons ceases to be a public listed company, a limited number of PLC-related functions “may be reduced in scope or become unnecessary.”

The Fortress group said it intends to “work with Morrisons’ management to identify the extent to which individuals involved in those functions may be reassigned to other appropriate roles within Morrisons on or before the offer becoming effective.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.