U.S. private equity group Clayton, Dubilier & Rice has made an offer to acquire supermarket chain Wm Morrison in a deal that would deprive Britain’s fourth-largest grocer, according to two people with direct knowledge of the matter.
One of those people said the board of directors of Morrisons, which has a market value of £ 4.3bn and £ 3.2bn in net debt, was meeting on Saturday to discuss the merits of The approach. The company declined to comment.
CD&R is working with Goldman Sachs on its offer, another person added. A statement clarifying his intentions could be released later on Saturday.
The exact value of an offer could not be learned immediately, but Sky News reported that CD&R was weighing an offer for Morrisons that would value the company at around £ 5.5 billion. CD&R and Morrisons declined to comment.
The approach highlights the growing appetite for private equity for UK assets and in particular supermarket chains.
Buyout groups have announced offers for at least 12 UK listed companies since the start of this year as Brexit and the pandemic weigh on stock prices. It is the fastest pace of private withdrawal attempts in more than two decades, according to figures from Refinitiv.
The CD&R approach comes as competition regulators this week cleared a £ 6.8 billion deal between the owners of gas station retailer EG Group, billionaire brothers Mohsin and Zuber Issa and the capital firm – TDR Capital investment, to buy the UK’s third largest supermarket chain, Asda.
CD&R counts Sir Terry Leahy, the former CEO of Tesco, among its advisers. Andrew Higginson, the current president of Morrisons, worked alongside Leahy at Tesco for many years. It is also an investor in EG Group’s gas station rival, Motor Fuel Group.
The Morrisons management team, led by Managing Director Dave Potts, has attempted to turn around the company’s performance since 2015, including entering into partnerships with Amazon and Deliveroo.
However, the market did not reward them. Shares are lower today than they were when Potts took control and have fallen 6.3% in the past year, compared to an 11.5% rise in the FTSE index 100 of the top UK companies it was a part of until early this year, when it was relegated.
Earlier this month, 70 percent of shareholders rejected its terms of remuneration.
In the year through the end of January, the company reported an 8% increase in same-store sales, although total revenue only increased 0.4% to 17.5 billion pounds due to sharply declining fuel sales.
Costs related to Covid affected profits, with net profit rising 0.5% to £ 96million. It employs 118,000 people, according to Capital IQ.
Analysts have long speculated that the group could face a bidder attracted by its cash generation and, like Asda, third, a high proportion of freehold stores.
CD&R has been among the most active private equity firms in the UK market this year, securing a £ 2.8bn deal to buy UK-listed health services group UDG and a 308 deal. million pounds for Wolseley, the plumbing company.