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A trio of private investment groups led by SoftBank-owned Fortress have signed a £ 9.5bn deal to acquire Wm Morrison, Britain’s fourth-largest supermarket chain.
Under the terms of an agreement filed Saturday morning, Fortress along with Canadian pension fund CPPIB and a unit of Koch Industries will pay 252p. Shares together with the support of a special dividend of 2 p. It values Morrisons ’net worth at £ 6.3 billion before the inclusion of £ 3.2 billion in net debt.
The deal comes two weeks after the Bradford-based group said it had rejected an unsolicited 230p per share approach by private equity group Clayton, Dubilier & Rice.
Fortress-led bid values Morrisons shares with a 42% premium before the company reveals it the CD&R approach.
The deal would be the largest private equity purchase in the UK since KKR bought Boots in 2007 and comes as purchasing groups have announced at least 12 UK listed companies since the beginning of this year, as the Brexit and the pandemic weigh on stock prices.
Andrew Higginson, President of Morrisons, said: “We have looked very closely at Fortress’s approach, its plans for the business and its overall suitability as the owner of a unique British manufacturer and shopkeeper with over 110,000 colleagues. and an important role in British food production and agriculture “.
He added: “We are clear that Fortress has a full understanding and appreciation of Morrisons’ fundamental character.”
As part of the deal, investors set a number of commitments, including plans to keep the store’s headquarters in Bradford. The group said it would safeguard pensions and “fully support” the supermarket’s agreement to pay all staff at least £ 10 an hour.
Fortress said he “does not anticipate” any “material” sales from Morrisons stores.
The Fortress-led group made a total of five approaches for Morrisons, starting May 4, when it offered 220p per share, according to people with direct knowledge of the issue.
Bidders have put more than £ 3bn in equity to fund the deal, about half of which comes from Fortress and the rest is split between CPPIB and Koch, according to people. CPPIB invests through its credit division.
The deal will be funded with £ 5.75 million in debt, signed by HSBC and the Royal Bank of Canada.
Fortress is owned by SoftBank of Japan, which acquired the business in a $ 3.3 billion deal in 2017 that made it an unusual asset within the technology investor portfolio.
Founded in 1998 by a trio of men like Wesley Edens, Fortress manages assets worth about $ 53.1 billion and is best known for her work in credit and distressed investment situations.
Fortress noted its experience by investing in American supermarkets Albertsons and Fresh & Easy and in gas station operators United Pacific, Alta Convenience and Circle K.
Fortress bought UK wine specialist Majestic Wine for £ 95 million in 2019.
Rival CD&R had been given until July 17 to make a firm offer for Morrisons or leave. Now that the board has backed an alternative offer, it’s unclear whether CD&R will attempt to disrupt the process with a backlash during what will be a months-long process of finalizing the Fortress deal.
Morrisons ’main shareholder is Silchester, a low-profile London-based asset manager that owns a 15% stake. The company did not immediately comment on Fortress’ offer.
Morrisons ’management team, led by CEO Dave Potts, has received praise for its attempt to turn the business around since 2015, but has failed to win over investors.
Before the CD&R approach was revealed, the shares had been traded at a lower level than they were when Potts took over.
During the year to the end of January, Morrisons recorded sales of £ 17.5 billion and a net profit of £ 96 million. The supermarket faced a revolt from shareholders over its wage provisions in June.
Additional reports by Attracta Mooney
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