The takeover battle for Wm Morrison has been prolonged after one of the bidders sweetened its offer to £6.7 billion in an attempt to thwart a rival only days before the deadline.
The Fortress-led consortium, which had secured a recommendation from the supermarket group’s board for a 254p-a-share bid, took the unusual step of increasing its cash offer to 270p a share and a 2p special dividend from its earlier proposal of 252p a share and a 2p dividend.
Clayton Dubilier & Rice, which offered £5.5 billion in June, had been given until Monday to make another offer, but Fortress’s move meant its rival was left short of time to secure the extra funding for a higher offer. It lodged a request with Morrisons’ board to delay its forthcoming shareholder vote.
In the hope that agreement will lead to an even higher bid, Morrisons said that it would delay the meeting until August 27, so Clayton Dubilier & Rice should have until August 20 to make a new offer, subject to agreement by the Takeover Panel.
Sources noted that the sweetened deal from the US-backed Fortress had been deliberately pitched above the 270p level that JO Hambro, one of Morrisons’ leading investors, had been calling for. They suggested it was inevitable that a higher price would have been offered after four of Morrison’s top shareholders — including Silchester, which owns a 15.1 per cent stake — opposed the bid tabled by Fortress.
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M&G, another key Morrisons investor, welcomed the higher offer after saying last month that it believed the earlier Fortress deal did not reflect the true value of the company. Rupert Krefting, M&G’s head of corporate finance and stewardship, said: “It’s very good news . . . It’s heading in the right direction.”
Britain’s fourth largest supermarket chain employs almost 120,000 staff. Its shares closed 6¾p, or 2.5 per cent, higher at 278¾p above Fortress’s offer, suggesting that investors are betting on further developments. Unusually for a takeover, the share price has been relatively unaffected by hedge fund activity, with less than 5 per cent of stock on loan, according to M&A Monitor.
The new price offered by Fortress is a 52 per cent premium to Morrisons’ share price in June before the takeover interest began and a 7 per cent premium on its first offer. It also means that David Potts, Morrisons’ chief executive, Trevor Strain, its chief operating officer, and Michael Gleeson, the chief financial officer, are due for a larger £37 million joint payday if the deal succeeds.
Fortress said that it “remains committed to becoming the new owner of Morrisons” and that its previous assurances on jobs, assets and pensions remained. Financing the higher offer has been made possible after GIC, Singapore’s sovereign wealth fund, joined the consortium.
Morrisons’ directors said that despite the delay to the vote, they continued to believe that the “increased Fortress offer is in the best interests of ’ shareholders and are not withdrawing their recommendation of it”.
