A consortium led by U.S. buyout firm Clayton, Dubilier & Rice is set to win the bidding war for U.K. grocery chain
PLC, an almost $9.4 billion bet that highlights the extreme lengths private-equity firms are willing to go amid a global deal frenzy.
The CD&R-led group emerged as the frontrunner after outbidding
SoftBank Group Corp.’s
Fortress Investment Group LLC and its partners in an unusual one-day auction held Saturday to decide the victor. The U.K. Takeover Panel, a government arm that oversees dealmaking in the country, held the contest to end a monthslong standoff fueled by increased offers by each side.
The winning bid represented a 61% increase in value compared with where Morrisons’ shares traded before news of the bidding emerged.
Based in New York and London, CD&R, which has partnered with U.S. buyout firm
Ares Management Corp.
and an investment arm of
Goldman Sachs Group Inc.,
is paying £2.87 a share, or equivalent to $3.90 a share. That just tops Fortress’s offer of £2.86 a share, according to a release by the Takeover Panel.
Morrisons, as it is known by British shoppers, operates 497 supermarkets along with a network of cafes, and gas stations and convenience-store outlets. The retailer also has a wholesale operation that includes supplying groceries to
Prime Now and other online delivery services available in Britain.
Representatives for CD&R and Fortress couldn’t immediately be reached for comment.
Pandemic-induced locked downs spurred a tripling of Morrisons’ e-commerce sales in its last fiscal year. Costs to meet that demand by adding additional capacity coupled among other Covid-19 related expenses, combined with a drop in fuel sales and the closure of the company’s cafes during lockdown, offset much of that gain.
The U.K. supermarket industry is highly competitive. Morrisons, founded in 1899, is the fourth-largest chain and faces stiff competition both from its larger rivals and German discounters Aldi and Lidl.
That competition pushed U.S. retail giant
in February to sell a majority stake of Asda Group Ltd., Britain’s third-largest grocery behind industry leader
PLC, to TDR Capital, a Europe-focused buyout firm, and U.K. entrepreneurs
The escalating sale price adds risk to the deal as the U.K. economy grapples with surging energy prices, staff shortages and supply chain disruptions across the food sector.
Write to Ben Dummett at email@example.com
Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8