Buyout giant considers £5.5bn bid for supermarket chain Morrisons

Published

4 years ago

June 19, 2021

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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.

Business

Nigel Farage relinquishes majority control of Reform UK

Published

7 hours ago

February 20, 2025

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Nigel Farage relinquishes majority control of Reform UK

Nigel Farage has given up sole control of Reform UK, with the party’s members now being “handed over ownership” following a vote last year, according to its chairman.

The party, led by Mr Farage, was previously controlled by the Clacton MP as he held a majority of shares in the company.

According to the party’s new constitution, a board will instead be set up that will lead and direct the party, with members voting in an advisory manner on policies at the annual conference.

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Members also have the power to call an “extraordinary general meeting”, and launch no-confidence motions in the party leader.

In a statement, Reform chairman Zia Yusuf said: “We are pleased to announce that, as promised, Nigel Farage has handed over ownership of Reform UK to its members.

“Reform UK is now a non-profit, with no shareholders, limited by guarantee.

“We are assembling the governing board, in line with the constitution.

“This was an important step in professionalising the party.

“We will soon have more exciting announcements about Reform UK as we prepare for government.”

Documents filed with Companies House show that all shareholders in Reform UK Party Limited have given up their shares and control of the organisation.

Instead, a limited company called Reform 2025 Ltd is listed as being in control of the party.

Reform 2025 Ltd has two directors – Mr Farage and Mr Yusuf – but no shareholders or persons with significant control.

It is understood this is because the membership is said to be in control.

This appears to put it in a similar structure to the Labour Party, while the Conservatives and Liberal Democrats appear to have controlling leaders or chairs.

According to the party’s website, Reform UK have more than 211,000 members – close to double the Conservative membership.

Mr Farage says he wants to overtake Labour, which has around 309,000 members.

The party won five seats at the last general election off the back of 4.1 million votes. For comparison, the Liberal Democrats won 72 seats off the back of 3.5 million votes.

This discrepancy is largely down to seats votes are concentrated in.

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Recent polling has shown that Reform are seen as stronger than Labour on a range of topics among voters, including trustworthiness, strength, and “clear sense of purpose”.

Earlier in February, the party also topped a voter intention poll for the first time.

Business

Sir Jim Ratcliffe’s difficult first year at Manchester United – but should the Glazers take more blame?

Published

14 hours ago

February 20, 2025

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Sir Jim Ratcliffe's difficult first year at Manchester United - but should the Glazers take more blame?

What happens when you put a boyhood fan in charge of their club?

They discover it’s not so simple to run after all. And the fans you sat with many years ago are as impatient as ever.

Anger reverberates exactly a year since Sir Jim Ratcliffe and his INEOS organisation gained day-to-day control of football operations at Manchester United.

Fans are furious about ticket price rises.

A charity helping former players has had funding slashed.

And rank-and-file staff – many loyal for years without Premier League salaries – have been swept out with 250 redundancies and warnings of more to come.

Sir Jim has taken the unpopular – but he would argue necessary – decisions to put the club on a healthier financial footing all while INEOS injected an additional £80m.

The Glazers

Being the face of cost-cutting and eradicating excesses can be reputationally damaging while the American family, still with the majority ownership, drift even deeper into the shadows.

The Glazers are blamed for the malaise and the debt burdened on a club that is one of the biggest money-makers in world football.

Just this week, United’s financial update to the New York Stock Exchange revealed they are set to make more than £650m this season.

But it also showed that the debt has climbed over £730m and has now cost more than £1bn to service in the last two decades.

Money has drained out of the club – to the Glazers – rather than, perhaps, being invested in Old Trafford upgrades or a new stadium as rivals have built glitzier, more lucrative venues.

Sky News US correspondent Mark Stone confronted executive co-chairman Avram Glazer over what has been a difficult year for the Red Devils.

When asked whether he would sell up the American businessman said: “No.”

He remained silent when asked if he was worried Sir Jim had made things worse, and also didn’t respond when asked if the Glazers should be facing more blame – as opposed to Sir Jim.

The British businessman bought a 27.7% stake in the club in February last year and took control of sporting operations. He later increased it to 29% but the Glazers remain majority owners of the club.

Floundering on and off the pitch

INEOS are now playing catch-up, trying to accelerate much-needed infrastructure upgrades, particularly at the training ground, which saw the women’s team temporarily pushed out.

But United have not been short of cash to spend on players, for the men’s team.

They have the highest net spend of any English club since Sir Alex Ferguson retired in 2013 at over £1.2bn – but without being able to add to the 13th Premier League titles he won.

In the summer and winter transfer windows, INEOS oversaw the arrival of £200m worth of new talent for the men’s team.

And yet the team is in its worst shape ever in the Premier League.

They’ve never been this low during a season – down in 15th place with 12 defeats in 25 matches.

This against the backdrop of decisions that can be viewed as bungled or quickly acknowledging mistakes.

Erik ten Hag was kept on as men’s team manager in the summer after aborting a firing plan following their FA Cup win.

But he went anyway in October – a change that cost £21m when you factor in Ruben Amorim’s release fee from Lisbon club Sporting.

It wasn’t the only hefty compensation bill.

Their pick for sporting director – Dan Ashworth – cost around £2m to prize away from Newcastle United.

But then he was ditched after just five months which, we discovered yesterday in new accounts, cost another £4m.

Fan fury

No wonder the supporters’ trust who protested against the Glazers are now aghast at “mismanagement” by the new leadership while still loading much blame on the Florida-based family.

And this while they are being asked to pay more to attend matches in fading facilities.

“Fans should not pay the price for a problem that starts with our crippling debt interest payments and is exacerbated by a decade or more of mismanagement,” the United Supporters’ Trust said.

“It’s time to freeze ticket prices and allow everyone – players, management, owners and fans – to get behind United and restore this club to where it belongs.”

INEOS – the petrochemicals giant that turned Sir Jim into a billionaire – has a lot of convincing to show they’re on the right path heading into year two at United.

And there could be the pain to come of seeing Liverpool match their record haul of 20 English titles.

Can INEOS rebuild a team and oversee the building of a new stadium without losing sight of the mission – to restore United’s greatness?

And the Glazers remain as tight-lipped as ever – but now flush with an extra £1.25bn from selling 29% to Sir Jim as he takes the heat.

Business

200 jobs lost as Quiz Clothing calls in administrators

Published

23 hours ago

February 19, 2025

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Hundreds more high street jobs will be lost this week after Quiz Clothing, the troubled fashion retailer, called in administrators.

Sky News understands that the company, which was listed until recently on the London Stock Exchange, will see the closure of 23 of its shops, with about 200 employees expected to be made redundant.

Quiz, which is chaired by the former JD Sports chief Peter Cowgill, has appointed the insolvency practitioner Teneo as administrator to Zandra Retail, which operates Quiz’s standalone stores in the UK and Ireland, after weeks of talks about a rescue deal.

The transaction is expected to be structured as a pre-pack administration, with the remaining assets being acquired by Orion Retail, a subsidiary of the company controlled by the founding Ramzan family.

Orion will hold the right to trade from 42 outlets previously occupied by Zandra.

One rival bidder said they understood that Teneo and the buyers had worked to preserve as many jobs as possible, with the majority understood to have been salvaged.

Sky News reported last month that Quiz Clothing traded from roughly 60 standalone stores and dozens more concessions, employing about 1,500 people.

QUIZ’s online business, concessions and international operations are operated by other Group subsidiaries and are unaffected by this announcement.

Sheraz Ramzan, CEO of Quiz, said in a statement issued to Sky News: “The board took the difficult decision to appoint administrators to Zandra Retail Limited in light of the continuing challenging trading conditions impacting the Group’s performance.

“We are deeply sorry to those affected by the store closures, including our retail colleagues.

“However, this decision will put the business in a more sustainable footing for the future and protect several hundred jobs as a result.”

Quiz’s main lender, HSBC, had recently hired restructuring experts at Interpath to advise it.

Quiz’s troubles come amid growing financial pressure on retailers, many of which are facing a deepening challenge in 2025 as a result of looming hikes to employers’ national insurance contributions.

In recent weeks, Sky News has revealed that: WH Smith was in talks to sell its entire high street chain, numbering 500 stores and about 5,000 employees; Poundland’s parent has hired advisers to assess options for the leading discount chain; Lakeland, the family-owned kitchenware retailer, has been put up for sale; and that The Original Factory Shop was being sold to Modella Capital.

Gavin Maher, Joint Administrator, said: “Although the sale has resulted in the transfer of a number of jobs, it has been necessary to make redundancies.

“We appreciate that this is a difficult and uncertain time for all involved and are communicating appropriately with all employees, customers and stakeholders.”