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One of the world’s biggest buyout firms is weighing a spectacular £5.5bn takeover bid for Wm Morrison, Britain’s fourth-largest supermarket chain by market share.

Sky News has learnt that Clayton Dubilier & Rice (CD&R) is in the early stages of evaluating an offer for the grocer, a move that would send fresh shockwaves through the UK’s food retailing industry.

With a workforce of approximately 110,000 people, Morrisons is one of the biggest private sector employers in Britain.

CD&R is said to have begun approaching banks about financing a potential bid for Morrisons in recent days.

It is also understood to have made a preliminary approach to Morrisons’ board.

One source cautioned, however, that a formal bid for the grocer was far from certain and that the public disclosure of CD&R’s interest could force the project to be abandoned.

The Takeover Panel, which polices merger activity involving London-listed companies, is likely to seek clarification from CD&R and Morrisons about whether they are in discussions.

It is possible that the buyout firm would cease work on a deal rather than confirm it publicly, as has happened in other recent UK takeover situations, according to one source.

If it does progress, however, a bid could entail a dramatic re-emergence in Britain’s supermarket sector by Sir Terry Leahy, one of CD&R’s operating partners in Europe.

Sir Terry, who reigned over Tesco for 14 years before retiring in 2010, would be expected to play a key role in a bid.

If a deal is completed, it would potentially reunite Sir Terry with Andrew Higginson and David Potts, Morrisons’ chairman and chief executive respectively, who both spent much of their careers at Tesco.

Further details of CD&R’s interest in Morrisons were unclear this weekend, although based on a conventional takeover premium, any offer would value the company at £5bn or more.

It was also unclear whether CD&R’s interest was being pursued on a standalone basis, or with a strategic or financial partner.

Morrisons had a market value at Friday’s closing share price of £4.3bn, with significant value still remaining in its freehold property portfolio.

Its shares have remained broadly flat during the last year, and are roughly midway between their peak and trough over that period.

Morrisons has a grocery market share of just over 10%, trailing third-placed Asda on 14.4%, according to Kantar, the market research group.

A takeover by CD&R would be the latest seismic deal in Britain’s grocery sector.

In 2019, J Sainsbury and Asda abandoned their attempt to merge into a £15bn retail group after it was blocked by the Competition and Markets Authority (CMA).

That decision spurred Asda’s owner, Walmart, to kick off an auction of the third-biggest supermarket by market share.

Last September, a consortium comprising TDR Capital and EG Group, the petrol stations giant controlled by Mohsin and Zuber Issa, was selected as the preferred bidder for Asda in a £6.8bn deal.

Their takeover was approved by the CMA this week after agreeing to sell 27 Asda petrol stations.

Asda’s new owners are now engaged in the search for a new chief executive to replace Roger Burnley, who will step down in the coming months.

CD&R ranks among the world’s largest private equity investors, having raised $16bn for its latest buyout fund earlier this year.

In the UK, it has been a prolific acquirer of large businesses, including B&M Retail, the discount chain which is now a publicly quoted company, and Motor Fuel Group (MFG), the petrol forecourt operator.

It has also participated in the recent frenzy of private equity bidders for London-listed companies, agreeing a £2.6bn takeover of the pharmaceuticals group UDG Healthcare several weeks ago.

The US-based buyout firm is regarded as a supportive long-term investor in the companies it backs, frequently building significant multibillion dollar enterprises from relatively small initial purchases.

People who have worked with CD&R in the UK say it significantly increased employment at companies including B&M and MFG after investing in their growth.

CD&R is said to have been attracted to Morrisons’ strong balance sheet and management team, although Mr Potts, 64, is expected to retire in the next few years.

The company was founded in 1899 by egg and butter merchant William Morrison at a stall in Bradford Market, it opened its first shop in 1958.

Its maiden supermarket followed three years later and in 1967, it floated on the stock exchange, preceding an unbroken 35-year run of sales growth which ultimately took it into the FTSE-100 index in 2001.

By then, Sir Ken Morrison, William’s son and the company’s veteran boss, had been knighted and in 2004 he engineered the most audacious move in Morrisons’ history: the £3bn takeover of Safeway which transformed it into a major nationwide grocery retailer.

Sir Ken stepped down as chairman in 2008, and he died in 2017 at the age of 85.

Morrisons’ performance stuttered under Dalton Phillips, who was ousted in 2015, leading to the appointment of Mr Potts.

Alongside Mr Higginson, the chief executive has engineered an impressive turnaround, and has signalled that more cash will be returned to shareholders as business normalises in the aftermath of COVID19.

CD&R’s interest in the chain is not the first time that a prospective buyer has examined an offer for Morrisons.

Amazon has been repeatedly rumoured as a suitor, with Morrisons established as a supplier of food products to the online behemoth’s Prime Now and Pantry customers.

Earlier this month, Morrisons was on the receiving end of one of the biggest shareholder revolts in UK corporate history when 70% of investors voted against its pandemic pay packages.

City institutions rebelled over its remuneration committee’s use of discretion to override the exceptional costs incurred by the coronavirus crisis.

Morrison’s saw annual profits slump to £201m last year, having decided – along with other big supermarkets – to hand back £230m in business rates relief to the government.

However, it has predicted that profits will rebound sharply this year and next as COVID-related costs subside.

This week, Tesco warned that sales are likely to fall as shopping behaviour returns to pre-pandemic levels.

CD&R and Morrisons both declined to comment on Saturday.

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‘Leicester is embargoed’: City’s clothing industry in crisis

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'Leicester is embargoed': City's clothing industry in crisis

You probably recall the stories about Leicester’s clothing industry in recent years: grim labour conditions, pay below the minimum wage, “dark factories” serving the fast fashion sector. What is less well known is what happened next. In short, the industry has cratered.

In the wake of the recurrent scandals over “sweatshop” conditions in Leicester, the majority of major brands have now abandoned the city, triggering an implosion in production in the place that once boasted that it “clothed the world”.

And now Leicester faces a further existential double-threat: competition from Chinese companies like Shein and Temu, and the impending arrival of cheap imports from India, following the recent trade deal signed with the UK. Many worry it could spell an end for the city’s fashion business altogether.

Gauging the scale of the recent collapse is challenging because many of the textile and apparel factories in Leicester are small operations that can start up and shut down rapidly, but according to data provided to Sky News by SP&KO, a consultancy founded by fashion sector veterans Kathy O’Driscoll and Simon Platts, the number has fallen from 1,500 in 2017 to just 96 this year. This 94% collapse comes amid growing concerns that British clothes-making more broadly is facing an existential crisis.

A trade fair tries to reignite enthusiasm for the city's clothing industry
Image:
A trade fair tries to reignite enthusiasm for the local clothing industry

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More on this story:
The modern slaves making our clothes in Leicester
How Leicester’s textile workers are being exploited
Boohoo failed in Leicester supply chain malpractice

In an in-depth investigation carried out over recent months, Sky News has visited sites in the city shut down in the face of a collapse of demand. Thousands of fashion workers are understood to have lost their jobs. Many factories lie empty, their machines gathering dust.

Graphic

The vast majority of high street and fast fashion brands that once sourced their clothes in Leicester have now shifted their supply chains to North Africa and South Asia.

And a new report from UKFT – Britain’s fashion and textiles lobby group – has found that a staggering 95% of clothes companies have either trimmed or completely eliminated clothes manufacturing in the UK. Some 58% of brands, by turnover, now have an explicit policy not to source clothes from the UK.

Seamstresses in former Leicester factory
Image:
Seamstresses in one of the city’s former factories

Clothing industry workers in Leicester
Image:
Clothing industry workers in Leicester

Jenny Holloway, chair of the Apparel & Textile Manufacturers Association, said: “We know of factories that were asked to become a potential supplier [to high street brands], got so far down the line, invested on sampling, invested time and money, policies, and then it’s like: ‘oh, sorry, we can’t use you, because Leicester is embargoed.'”

Tejas Shah, a third-generation manufacturer whose family company Shahtex used to make materials for Marks & Spencer, said: “I’ve spoken to brands in the past who, if I moved my factory 15 miles north into Loughborough, would be happy to work with me. But because I have an LE1, LE4 postcode, they don’t want to work for me.”

Shahtex in Leicester used to make materials for Marks & Spencer
Image:
Shahtex in Leicester used to make materials for Marks & Spencer

Tejas Shah is a third-generation manufacturer
Image:
Tejas Shah, of Leicester-based firm Shahtex

Threat of Chinese brands Shein and Temu

That pain has been exacerbated by a new phenomenon: the rise of Chinese fast fashion brands Shein and Temu.

They offer consumers ultra-cheap clothes and goods, made in Chinese factories and flown direct to UK households. And, thanks to a customs loophole known as “de minimis”, those goods don’t even incur tariffs when they arrive in the country.

An online advert for Chinese fast fashion company Shein
Image:
An online advert for Chinese fast fashion company Shein

According to Satvir Singh, who runs Our Fashion, one of the last remaining knitwear producers in the city, this threat could prove the final straw for Leicester’s garments sector.

“It is having an impact on our production – and I think the whole retail sector, at least for clothing, are feeling that pinch.”

Inside one of the city's remaining clothesmakers
Image:
Inside one of the city’s remaining clothesmakers

While Donald Trump has threatened to abolish the loophole in the US, the UK has only announced a review with no timeline.

“If we look at what Trump’s done, he’s just thinking more about his local economy because he can see the long-term effects,” said Mr Singh. “I think [abolishing de minimis exceptions] will make a huge difference. I think ultimately it’s about a level playing field.”

A spokesperson for Temu told Sky News: “We welcome UK manufacturers and businesses to explore a low-cost way to grow with us. By the end of 2025, we expect half our UK sales to come from local sellers and local warehouses.”

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Thames Water hit with largest-ever fine issued by regulator Ofwat

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Thames Water hit with largest-ever fine issued by regulator Ofwat

Thames Water, the UK’s biggest water provider, has been hit by a record fine by regulator Ofwat.

The company has been fined £122.7m following Ofwat’s “biggest and most complex” investigation.

It follows two investigations related to Thames Water’s wastewater operations and dividend payouts.

Of the total fine, £104.5m – 9% of Thames Water‘s turnover – has been levied for breaches of wastewater rules – just below the maximum 10% of turnover that Ofwat could have applied.

Money blog: Inside the booming one-bed flat market

Pic: istock
Image:
Pic: istock

Another £18.2m penalty will be paid for breaches of dividend payment rules.

It is the first time Ofwat has fined a company for shareholders’ payments which do not “properly reflect” its performance for customers and the environment.

The fine will be paid by Thames Water and its shareholders, Ofwat said, rather than customers.

‘Unacceptable’ environmental impact

The regulator was highly critical of Thames Water’s handling of wastewater, describing it as having an “unacceptable” impact on the environment.

Its investigation of treatment works and the wider wastewater network uncovered failings which “amounted to a significant breach of the company’s legal obligations” and caused that unacceptable environmental impact.

The company announced a 40% spike in sewage spills in December for the period from January to September 2024.

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Thames Water boss can ‘save’ company

The fine was so large because Ofwat’s chief executive, David Black, said Thames Water “failed to come up with an acceptable redress package that would have benefited the environment”.

“This is a clear-cut case where Thames Water has let down its customers and failed to protect the environment,” Mr Black said.

“Our investigation has uncovered a series of failures by the company to build, maintain and operate adequate infrastructure to meet its obligations.”

As a result, Thames Water is required to agree to a remediation plan with Ofwat within six months.

Another investigation by the Environment Agency into environmental permits at sewage treatment works is ongoing.

Bad news for Thames Water finances

Thames Water serves 16 million customers across London and the South East and has just about fended off effective nationalisation, having secured an emergency £3bn loan. Its debts now top £19bn.

These fines were not factored into Thames Water’s financial planning for the next five years. The company’s chief executive, Chris Weston, told a recent sitting of the Environment, Food and Rural Affairs select committee that Thames Water’s future was dependent on Ofwat being lenient with fines.

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A Thames Water spokesperson said: “We take our responsibility towards the environment very seriously and note that Ofwat acknowledges we have already made progress to address issues raised in the investigation relating to storm overflows.

“The dividends were declared following a consideration of the company’s legal and regulatory obligations. Our lenders continue to support our liquidity position and our equity raise process continues.”

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‘Leicester is embargoed’: City’s clothing industry in crisis

Published

on

By

'Leicester is embargoed': City's clothing industry in crisis

You probably recall the stories about Leicester’s clothing industry in recent years: grim labour conditions, pay below the minimum wage, “dark factories” serving the fast fashion sector. What is less well known is what happened next. In short, the industry has cratered.

In the wake of the recurrent scandals over “sweatshop” conditions in Leicester, the majority of major brands have now abandoned the city, triggering an implosion in production in the place that once boasted that it “clothed the world”.

And now Leicester faces a further existential double-threat: competition from Chinese companies like Shein and Temu, and the impending arrival of cheap imports from India, following the recent trade deal signed with the UK. Many worry it could spell an end for the city’s fashion business altogether.

Gauging the scale of the recent collapse is challenging because many of the textile and apparel factories in Leicester are small operations that can start up and shut down rapidly, but according to data provided to Sky News by SP&KO, a consultancy founded by fashion sector veterans Kathy O’Driscoll and Simon Platts, the number has fallen from 1,500 in 2017 to just 96 this year. This 94% collapse comes amid growing concerns that British clothes-making more broadly is facing an existential crisis.

More on this story:
The modern slaves making our clothes in Leicester
How Leicester’s textile workers are being exploited
Boohoo failed in Leicester supply chain malpractice

In an in-depth investigation carried out over recent months, Sky News has visited sites in the city shut down in the face of a collapse of demand. Thousands of fashion workers are understood to have lost their jobs. Many factories lie empty, their machines gathering dust.

Graphic

The vast majority of high street and fast fashion brands that once sourced their clothes in Leicester have now shifted their supply chains to North Africa and South Asia.

And a new report from UKFT – Britain’s fashion and textiles lobby group – has found that a staggering 95% of clothes companies have either trimmed or completely eliminated clothes manufacturing in the UK. Some 58% of brands, by turnover, now have an explicit policy not to source clothes from the UK.

Seamstresses in former Leicester factory
Image:
Seamstresses in one of the city’s former factories

Clothing industry workers in Leicester
Image:
Clothing industry workers in Leicester

Jenny Holloway, chair of the Apparel & Textile Manufacturers Association, said: “We know of factories that were asked to become a potential supplier [to high street brands], got so far down the line, invested on sampling, invested time and money, policies, and then it’s like: ‘oh, sorry, we can’t use you, because Leicester is embargoed.'”

A trade fair tries to reignite enthusiasm for the city's clothing industry
Image:
A trade fair tries to reignite enthusiasm for the local clothing industry

Tejas Shah, a third-generation manufacturer whose family company Shahtex used to make materials for Marks & Spencer, said: “I’ve spoken to brands in the past who, if I moved my factory 15 miles north into Loughborough, would be happy to work with me. But because I have an LE1, LE4 postcode, they don’t want to work for me.”

Shahtex in Leicester used to make materials for Marks & Spencer
Image:
Shahtex in Leicester used to make materials for Marks & Spencer

Tejas Shah is a third-generation manufacturer
Image:
Tejas Shah, of Leicester-based firm Shahtex

Threat of Chinese brands Shein and Temu

That pain has been exacerbated by a new phenomenon: the rise of Chinese fast fashion brands Shein and Temu.

They offer consumers ultra-cheap clothes and goods, made in Chinese factories and flown direct to UK households. And, thanks to a customs loophole known as “de minimis”, those goods don’t even incur tariffs when they arrive in the country.

An online advert for Chinese fast fashion company Shein
Image:
An online advert for Chinese fast fashion company Shein

According to Satvir Singh, who runs Our Fashion, one of the last remaining knitwear producers in the city, this threat could prove the final straw for Leicester’s garments sector.

“It is having an impact on our production – and I think the whole retail sector, at least for clothing, are feeling that pinch.”

Inside one of the city's remaining clothesmakers
Image:
Inside one of the city’s remaining clothesmakers

While Donald Trump has threatened to abolish the loophole in the US, the UK has only announced a review with no timeline.

“If we look at what Trump’s done, he’s just thinking more about his local economy because he can see the long-term effects,” said Mr Singh. “I think [abolishing de minimis exceptions] will make a huge difference. I think ultimately it’s about a level playing field.”

Continue Reading

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