Morrisons rejects $7.62bn bid from US private equity firm

June 21, 2021 (Last Updated June 21st, 2021 16:14)

The offer from Clayton, Dubilier and Rice (CD&R) was deemed to "significantly undervalue" the supermarket chain.

Morrisons rejects $7.62bn bid from US private equity firm
Morrisons rejects $7.62bn bid from Clayton, Dubilier and Rice (CD&R). Credit: Elliott Brown / Flickr.

British supermarket chain Morrisons has rejected an unsolicited conditional non-binding proposal from US-based private equity firm Clayton, Dubilier and Rice (CD&R).

CD&R had offered to pay 230p (£2.30) a share in cash for the retailer’s entire issued and to be issued share capital.

Morrisons declined the offer after discussing it with its advisor, financial firm Rothschild and Co.

Last Friday, Morrisons’ share price closed at 178.45p (£1.79), valuing the company at £4.3bn ($5.9bn).

It was also confirmed that CD&R was considering a potential cash offer for the retailer’s issued and to be issued share capital.

Under UK takeover rules, the private equity firm had until 17 July to announce its intention to make an offer.

In a statement, Morrisons said: “[Our] board evaluated the conditional proposal together with its financial advisor, Rothschild and Co, and unanimously concluded that the conditional proposal significantly undervalued [the retailer] and its future prospects.

“As a result, the board rejected the conditional proposal on 17 June.”

With more than 118,000 employees, Morrisons owns the freehold for 85% of its 497 stores and has 19 manufacturing sites, including bakeries, abattoirs, fishing fleets and egg farms.

Last year, the retailer’s annual profit reduced to £201m from £408m prior to the Covid-19 pandemic.

In its first-quarter trading update, Morrisons reported its total sales, including fuel, were up by 5.3% in the 14 weeks ending on 9 May.

The retailer said that its online sales during the first quarter saw year-on-year growth of 113%. It incurred a further £27m of ‘direct Covid-19 costs’.

This year, Morrisons plans to open two new stores in Kirkby and Chelmsford, and two temporary replacement stores in Camden and Little Clacton.

In March, the retailer extended its exclusive 10% discount for National Health Service (NHS) workers for the rest of the year.

The discount, introduced last April to support frontline workers amid the Covid-19 pandemic, has been effective since 1 April for shopping in-store.