By James Davey
LONDON (Reuters) – British supermarket group Morrisons on Thursday agreed a takeover offer worth 7.0 billion pounds ($9.54 billion) from U.S. private equity group Clayton, Dubilier & Rice (CD&R), dropping its recommendation of a lower bid from a consortium led by Fortress Investment Group.
Morrisons said CD&R’s offer is worth 285 pence a share, trumping a 272 pence a share offer, worth 6.7 billion pounds, from the consortium led by Softbank-owned Fortress.
CD&R’s offer, which Morrisons’ board intends to recommend unanimously, gives the supermarket chain an enterprise value of 9.7 billion pounds once its debt is taken into account.
The battle for Britain’s fourth-largest grocer after Tesco, Sainsbury’s and Asda, is the most high-profile looming takeover amid a raft of bids and counter bids, reflecting private equity’s appetite for UK Plc.
CD&R’s agreed bid represents a 60% premium to Morrisons’ share price before takeover interest emerged in mid-June.
Morrisons’ shares closed Thursday at 279.2 pence, indicating investors expected a higher offer.
CD&R, which has former Tesco boss Terry Leahy as a senior adviser, had a 230 pence-a-share proposal worth 5.52 billion pounds rejected by Morrisons on June 17.
Morrisons subsequently recommended a bid from Fortress worth 6.3 billion pounds, which was then raised after major shareholders, including Silchester, M&G and Hambro, indicated they wanted more.
CD&R said it was committed to supporting Morrisons’ existing management team, led by CEO David Potts, and executing its current strategy.
“The Morrisons board believes that the offer from CD&R represents good value for shareholders while at the same time protecting the fundamental character of Morrisons for all stakeholders,” said Chairman Andrew Higginson.
CD&R’s track record of UK investments includes foodservice group Brakes Brothers and discount retailer B&M. Current investments include petrol forecourt retailer Motor Fuel Group (MFG) and industrial groups Wolseley and SIG.
Morrisons shareholders will vote on the offer at meetings expected around the week starting Oct. 4.
Under British takeover rules, Fortress could still come back with a higher offer.
A spokesman for Fortress had no immediate comment.
Analysts have speculated that U.S. giant Amazon, which has a partnership deal with Morrisons, could still enter the fray, though most believe if it was interested it would have done so by now.
(Reporting by James Davey, editing by Elizabeth Piper and Sonya Hepinstall)
