UK supermarket chain Morrisons has accepted a £7 billion ($9.54 billion) takeover offer from US private equity firm Clayton, Dubilier & Rice (CD&R), surpassing a previous bid from a consortium led by Fortress Investment Group. This battle for Morrisons, the fourth-largest grocer in Britain, is regarded as one of the most significant in the country. The bid from CD&R represents a 60% premium to Morrisons’ share price before the takeover interest arose in June.

Initially, CD&R had offered £5.52 billion, which Morrisons rejected. The supermarket chain then recommended a bid from Fortress worth £6.3 billion, but this was raised after major shareholders pushed for a higher offer. CD&R intends to retain Morrisons’ current management team and execute its strategy, emphasizing that it has no plans for significant store sale and leaseback transactions.

Morrisons shareholders will vote on CD&R’s offer in meetings expected to take place in early October. However, under British takeover rules, Fortress still has the option to make a higher bid. Speculation has arisen about whether Amazon, which already has a partnership with Morrisons, might enter the bidding war, although some analysts believe that if the tech giant was interested, it would have already made a move.

CD&R’s current investments include Motor Fuel Group (MFG), which operates fuel forecourts in the UK. With Morrisons also owning fuel forecourts, CD&R aims to strengthen its wholesale business and convenience store portfolio through a potential partnership with the supermarket. However, this overlap in the forecourt sector may face scrutiny from the UK’s competition regulator.

Overall, this takeover battle highlights the increased interest of private equity firms in acquiring UK companies and reflects their appetite for British businesses. The agreed bid from CD&R not only represents good value for Morrisons’ shareholders but also aims to protect the fundamental character of the supermarket for all stakeholders.

Useful links:
BBC News: Morrisons accepts £7bn rais in CD&R offer
Financial Times: Morrisons board to recommend £7bn CD&R deal