Clayton, Dubilier & Rice, the US private equity group, have proposed acquiring supermarket chain Wm Morrison in a deal that will take Britain’s fourth-largest business, according to two people with direct knowledge of the matter.
One of those people said Morrisons ’board, which has a market value of £ 4.3 billion and £ 3.2 billion in net debt, had met Saturday to discuss the merits of the approach. The company declined to comment.
CD&R is working with Goldman Sachs on its offer, another person added. A statement clarifying their intentions could be released later Saturday.
The exact value of an offer could not be immediately learned, but Sky News said CD&R weighed in on an offer for Morrisons that would have valued the company at around £ 5.5 billion. CD&R and Morrisons declined to comment.
The approach highlights the growing appetite for private equity for British assets and in particular, supermarket chains.
Buyout groups have been announcing bids for at least 12 listed companies in the UK since the beginning of this year, as Brexit and the pandemic weighed on stock prices. It’s the fastest pace of private attempts for more than two decades, Refinitiv figures show.
The CD&R approach comes when competition regulators this week released a £ 6.8bn deal from the owners of gas station distributor EG Group, billionaire brothers Mohsin and Zuber Issa and the private company TDR Capital, to buy the UK’s third largest supermarket chain Asda.
CD&R counts Sir Terry Leahy, the former chief executive of Tesco, among its advisers. Andrew Higginson, the current Morrisons president, has worked with Leahy at Tesco for several years. He is also an investor in EG Group’s gas station rival, Motor Fuel Group.
Morrisons ’management team, led by executive director Dave Potts, has been trying to turn business performance around since 2015, also through collaborations with Amazon and Deliveroo.
However, the market did not reward them. Shares are lower now than they were when Potts took the right and fell 6.3 percent last year, compared with an 11.5 percent increase in the first companies ’FTSE 100 index. British where he was a constituent until earlier this year when he was relegated.
Earlier this month, 70 percent of the stock refused their pay arrangements.
In the year to the end of January, the company reported an 8 per cent increase in sales in the same store, although total turnover grew by only 0.4 per cent to £ 17.5 billion. due to sharply lower fuel sales.
Covid-related costs have affected profits, with net income rising 0.5 per cent to £ 96 million. It employs 118,000 people, according to Capital IQ.
Analysts have long speculated that the group could fall to an offer attracted by its cash generation and, like Asda in third place, a high proportion of free property deals.
CD&R has been among the most active private equity firms in the UK market this year, agreeing to a £ 2.8bn deal to buy the listed UDG health services group in the UK and a deal of £ 308 million for Wolseley, the plumbing company.