Morrisons, one of the largest supermarket chains in the UK, is one step closer to a possible takeover as its board has endorsed a £6.3 billion bid from a consortium led by Fortress, a Softbank-owned company. The consortium includes Canada Pension Plan Investment Board and Koch Real Estate Investments. However, this does not mean that Fortress will definitely win, as three other private equity groups have also expressed interest in acquiring Morrisons.

Just recently, Clayton, Dubilier & Rice (CD&R) made a £5.52 billion offer, which was turned down. This raised concerns that another major UK supermarket could fall into the hands of private equity, following the recent takeover of Asda. Politicians, trade unions, and various organizations have called for assurances to safeguard jobs and pensions in the event of a private equity deal. Past instances of UK retailers in private ownership have resulted in substantial job losses and pension fund deficits.

Fortress’s recommended offer includes a purchase price of £6.3 billion along with £3.2 billion of net debt, surpassing CD&R’s offer. However, Apollo, a New York-based investment firm, has also expressed interest in making a bid. It remains uncertain whether a bid will materialize or if CD&R will come back with a higher offer.

If one of the private equity groups succeeds, it would be the biggest private equity takeover of a UK company since Boots was purchased for £11 billion in 2007. The board and potential bidders are well aware of concerns about the future of the business under private equity control. Morrisons’ chairman, Andrew Higginson, has stated that they thoroughly assessed Fortress’s approach and plans for the business, as well as their suitability as owners of a unique British food manufacturer and retailer with a significant presence in British food production and farming.

Fortress has promised to maintain Morrisons’ Bradford headquarters and retain the current management team. They also support the recent wage increase for shop employees. In addition, they have no intentions of selling and leasing back the chain’s properties, a common strategy employed by private equity companies. This is positive news for Morrisons, as such deals can result in substantial future rent obligations for retailers.

Joshua Pack, managing partner at Fortress, has emphasized their commitment to making long-term investments that provide support to management teams in executing their strategies in a sustainable and value-enhancing manner. They recognize the importance of Morrisons to its employees, customers, pension scheme members, local communities, partner suppliers, and farmers.

Overall, the potential takeover of Morrisons by private equity groups is nearing a resolution, but the competition is still open. The recommended bid from Fortress has raised the stakes, but Apollo and CD&R may still enter the race with higher offers. The outcome will have significant implications for the future of one of the UK’s leading supermarket chains.

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