A trio of private investment groups led by the fortress owned by SoftBank have signed a deal to buy Wm Morrison, Britain’s fourth-largest supermarket chain, worth £ 9.5 billion.
Under the terms of the agreement announced Saturday morning, the firm, along with Canadian pension fund CPPIB and the Koch Industries unit, will pay 252p per share, backed by a 2p special dividend to buy the store. It estimates Morrisons ’capital at £ 6.3bn before including £ 3.2bn of net debt.
The deal comes two weeks after the Bradford-based group said it refused unwanted access of 230 p per share from the private equity group Clayton, Dubilier & Rice.
The offer led by Fortress values Morrisons shares at a premium of 42 percent to their price before the company is disclosed CD & R access.
The deal would be the largest private equity buyout in the UK since KKR bought Boots in 2007, and comes when buyout groups have announced at least 12 UK-listed companies since earlier this year, as Brexit and the pandemic affect stock prices.
Andrew Higginson, chairman of Morrisons, said: “We have looked very carefully at the Fort’s approach, their business plans and their overall suitability as the owner of a single British food producer and trader with over 110,000 colleagues and an important role in British food production. and farming. “
He added: “It is clear to us that the Fortress fully understands and respects the fundamental character of the Morrisons.”
As part of the agreement, investors set out a number of commitments, including plans to keep the trade headquarters in Bradford. The group said it would protect pensions and “fully support” the supermarket’s agreement that all staff pay at least £ 10 an hour.
The Fortress Group said it would assess options for the future of Morrison gas stations within six months of finalizing the agreement. During this period, it will also assess potential acquisitions and review Morrisons ’long-term plans for its asset portfolio.
The fort said it did not anticipate the sale and lease of Morrisons stores. Morrisons owns 85 per cent of its 497 stores and also has one of the UK’s largest food manufacturing companies.
The new owners would review the “incentive structures,” they said.
The Fort-led group has made a total of five approaches for Morrisons, starting on May 4 when it offered 220 p per share, said people who know directly about it.
The New York-based fort has been considering joining Morrisons since late last year, people said. He had not done major British deals of this kind before, but was looking at the country at a time when Brexit and the pandemic had hit stock prices, causing many UK companies to trade at lower ratios than those in the US.
Bidders are investing over £ 3bn in capital to fund the deal, about half of which is from the fort and the rest is split between CPPIB and Koch, people said. CPPIB invests through its credit division.
The deal will be financed with £ 5.75 billion in debt and has been taken over by HSBC and the Royal Bank of Canada.
The fortress is owned by Japan’s SoftBank, which acquired a $ 3.3 billion deal in 2017, making it an unusual asset in the technology investor’s portfolio.
The fort, founded in 1998 by a trio of men, including Wesley Edens, manages assets of about $ 53.1 billion and is best known for its work in credit and investment situations.
The fortress pointed to its experience of investing in the American supermarkets Albertsons and Fresh & Easy and the gas station operators United Pacific, Alta Convenience and Circle K.
Fortress bought British special wine retail Majestic Wine’s retail for £ 95 million in 2019.
Rival CD&R had previously been given until July 17 to either make a firm offer to Morrisons or to leave. Now that the committee has backed an alternative offer, it is unclear whether CD&R will try to disrupt the anti-ban process during, which will be a months-long process of finalizing the Fortress agreement.
Mark Kelly, general manager of Cowen, said in a note from Saturday that the bid for Fortress may not be the end of the game.
“Recent calls from shareholders are to consider prices like 270p appropriate,” he said.
“Morrisons’ board probably saw that there was a lack of tension in the absence of competition – and therefore once [private equity] the bidder has offered a bid to an acceptable extent, it is an appropriate tactic to accept it, publish it and hope that a competitive auction will follow. ”
Ross Hindle, an analyst at Third Bridge, said it would be an indication of how Amazon would react to the news. “They’re Morrison’s key partner, with a lot of speculation that they might make an offer,” he said.
Morrisons ’largest shareholder is Silchester, a poor London-based asset manager who owns a 15 per cent stake. The company did not immediately comment on the offer for the Fortress.
The deal would require the approval of 75 percent of Morrisons shareholders under a takeover mechanism known as the arrangement scheme.
The Morrisons management team, led by CEO Dave Potts, has received praise for trying to turn the deal around since 2015, but has failed to win over investors.
Before the CD&R approach was discovered, stocks were trading lower than when Potts took power.
In the year to the end of January, Morrisons reported sales of £ 17.5 billion and net income of £ 96 million. The grocery store faced a shareholder revolt over its wage arrangements in June.
Additional reporting Attracta Mooney