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UK supermarket shares rocket with Morrisons up 30 per cent after takeover bid

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A spate of recent private equity interest in the UK's supermarkets has prompted the chair of the parliamentary business committee to question whether the competition watchdog has sharp enough teeth to deal with such bids.
Analysts at Bernstein said they “struggle to see” how Morrisons’ assets would not be stripped if the takeover proceeds at the current offer price

Morrisons’ share price leapt 30 per cent just minutes after the market open this morning, in wake of news a private equity firm approached the supermarket with a £5.5bn takeover bid.

In fact, shares in all major UK’s biggest supermarkets soared on this morning after Morrisons rejected a takeover bid from a US private equity giant.

In Morrisons’ wake, shares in Sainsbury’s rose by 4.4 per cent, Ocado had gained around 3 per cent, and Tesco was trading up 2.7 per cent.

Yesterday Morrisons rejected a £5.5bn takeover bid from private equity firm Clayton, Dubilier & Rice (CD&R), believing it would have “significantly undervalued” the company.

People close to the discussions told the Financial Times that CD&R would now wait to gauge investor reactions and if there is any political pushback before deciding what to do next.

CD&R has until July 17 to announce a firm intention to make an offer under UK takeover rules.

In a statement released over the weekend the private equity firm said there can be “no certainty an offer will be made”.

Rejected

Morrisons said it rejected a conditional cash offer from CD&R of 230 pence per share – which amounts to just over £5.5bn.

In a statement, the supermarket chain said: “The board of Morrisons evaluated the conditional proposal together with its financial adviser, Rothschild & Co, and unanimously concluded that the conditional proposal significantly undervalued Morrisons and its future prospects.

“Accordingly, the board rejected the conditional proposal on 17 June 2021.”

Last month, Morrisons said sales in the 14 weeks to May 9 grew 2.7 per cent on a like-for-like basis, excluding fuel, including a 113 per cent ump in online sales.

But before the easing of lockdown, the supermarket said it had to spend an extra £27m in Covid-19 costs during the past three months to cover for staff absences and store marshals.