After Apollo, a private equity firm, said it was looking into joining the fight to buy the UK supermarket chain, Morrisons shares soared 11%.
Apollo, third potential suitor, declared an interest in Morrisons on Monday. It announced to the stock exchange that it was “in preliminary stages of evaluating [a] possible offer for Morrisons”, a move that could outweigh a bid of PS6.3bn by a consortium headed by Fortress, the US investment fund.
Morrisons shares rose more than 11% to 267p Monday morning. This made it the top-rising share on the FTSE 250. It also surpassed a 254p a Share bid from Fortress over this weekend.
Morrisons’ board confirmed Saturday that it accepted the Fortress offer. However, the deal will still need to go to shareholders. They could be persuaded by generous offers as the bidding war heats.
Apollo stated that it had not yet approached Morrisons about making a bid, and did not disclose the potential value of its offer. The New York-based group stated that it would make another announcement as necessary.
The supermarket, which has 500 stores and approximately 118,000 employees in the UK, rejected a PS5.5bn buyout offer by Clayton, Dubilier & Rice (CD&R). It said it was too low. CD&R has until July 17 to make a better offer or walk away.
If it is approved, Fortress’ PS6.3bn bid will be the largest private equity deal since 2007’s Boots takeovers at PS11bn. Fortress teamed up to launch the deal with the billionaire US industrialists Koch Family and Canada Pension Plan Investment Board.
Because of its supply chain structure and property footprint, the supermarket is said to be attracting suitors. Morrisons holds the freehold of 85% of its 497 shops and is proud to boast its 19 manufacturing sites, including bakeries and abattoirs. During the Brexit pandemic, the grocer was a keystone of the UK’s food supply infrastructure.
Richard Hunter, Interactive Investor’s head of markets, stated that new bidders can still get in the game.
“Apollo Global Management confirmed that they are considering an approach after recently missing out on a deal for Asda,,” he stated. The billionaire Issa Brothers purchased the rival supermarket chain for PS6.8bnearlier in the year.
Hunter said that this could result in a three-way bidding battle. There is speculation that Amazon, following its business relationship and Morrisons, could emerge unexpectedly as an unexpected last-minute entrant.