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FORTRESS-LED GROUP BUYS UK’S MORRISONS FOR $8.7B
- By The Financial District
- Jul 5, 2021
- 2 min read
A group led by US-based Fortress Investment has agreed to buy Morrisons, the UK’s fourth-largest supermarket chain, for 6.3 billion pounds ($8.7 billion) as overseas investors look for bargains in a market battered by Brexit and the pandemic, Danica Kirka reported for the Associated Press (AP).
The deal comes just a month after Morrisons rejected a 5.5 billion pound offer from New York-based Clayton, Dubilier & Rice, saying the bid undervalued the company.
The Fortress-led group agreed to pay 254 pence a share for Morrisons, 42% more than the shares were worth before the Clayton Dubilier bid, Morrisons said Saturday. The group also includes the Canada Pension Plan Investment Board and Koch Real Estate Investments.
UK assets are relatively cheap after uncertainty over Britain’s departure from the European Union and widespread COVID-19 restrictions weighed on stock prices. Britain’s benchmark FTSE 100 Index has fallen 7.3% since the beginning of last year, compared with a 26% gain in the S&P 500.
Grocery stores are also racing to adjust to the shift toward online shopping as many consumers opted for home deliveries to avoid face-to-face contact during the pandemic. Almost 29% of all retail spending took place online in May, up from 19.9% in February 2020, according to government statistics.
“This signals the biggest shakeup in the UK grocery sector for over a decade...,” Richard Lim, CEO of the independent consultancy Retail Economics, said of the Morrisons deal.
“The shift towards online grocery shopping, the growth of rapid delivery and the cross-over with the takeaway market presents lucrative opportunities if the transition of ownership becomes seamless.”
Private equity investors such as Fortress typically acquire undervalued companies then look for ways to cut costs and boost profits before selling them at a profit. Morrisons said Fortress intends for the company to remain a standalone operation led by its current management.
The jobs and pension rights of employees will be safeguarded, and Fortress supports a recent decision to pay its staff at least 10 pounds an hour, Morrisons said.
