Top funds line up to oppose supermarket Morrisons bid


Two of Morrisons’s biggest shareholders declare takeover offer from private equity predators too low

Two of Morrisons’s biggest shareholders last night declared that the £6.3billion takeover offer from private equity predators was too low. 

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

The comments came just a day after Silchester, Morrisons’s largest shareholder, opposed the 254p-per-share offer and questioned what the Fortress-backed consortium brings to the table. 

Pushing back: The comments came just a day after Silchester, Morrisons's largest shareholder, opposed the 254p-per-share offer

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

The interventions represent a setback for the board – including chairman Andrew Higginson, chief executive David Potts and senior nonexecutive director Rooney Anand – after they agreed the takeover with Fortress and recommended that shareholders back the deal. 

The City is now braced for a higher bid from Fortress and a possible counter offer from private equity rival Clayton Dubilier & Rice which saw an earlier £5.5bn approach rejected. A higher bid would indicate that the board sold out too early. 

Fund managers at JO Hambro, Morrisons’s tenth biggest shareholder, said the offer approved by the board ‘falls short’ of the 270p level they believe ‘merits engagement and consideration’. 

Another top 20 investor, who did not want to be named, also put a price tag of 270p a share or £6.8bn on the grocer. 

The fund manager said: ‘I think the price is not at all compelling – I will not be accepting it. I would hope for something better than 270p. 

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‘When companies are taken private there should be a premium and Morrison is an undervalued share.’ 

The Fortress bid has already attracted criticism from Legal & General, the eighth biggest shareholder in Morrisons with a 2.8 per cent stake, which said the supermarket chain should not be taken private for the ‘wrong reasons’. M&G, another investor, said it was keeping a watchful eye on the deal and pledged to speak out if it believes that shareholders’ interests are at risk. 

Fortress yesterday enlisted the might of Singapore’s sovereign wealth fund GIC into its consortium, giving it significant financial firepower. The alliance also took a potential competitor out of 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 weighing whether it will need to increase its bid to win over shareholders at a general meeting, scheduled for August 16. 

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

 Shares closed at 266p yesterday meaning the market believes further price increases are likely.

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