Morrisons share price leaps 11% as Apollo says it is considering bid

Shares in Morrisons jumped 11% after the private equity group Apollo said it was considering joining the battle to buy the UK supermarket chain.

Apollo became the third potential suitor to declare an interest in Morrisons, announcing to the stock exchange on Monday that it was “in the preliminary stages of evaluating a possible offer for Morrisons”, in a move that could trump a £6.3bn bid by a consortium led by the US investment fund Fortress, the owner of Majestic Wine.

The news sent Morrisons shares up more than 11% to 267p on Monday morning, making it the top riser on the FTSE 250 and putting it above a 254p a share bid from Fortress over the weekend.

The board of Morrisons confirmed on Saturday that it had accepted the Fortress offer, although the potential deal would still need to be put to shareholders, who could be swayed by more generous offers as the bidding war heats up.

Apollo said it had not yet approached the Morrisons board about making a bid and it did not reveal the value of its potential offer. “A further announcement will be made as appropriate,” the New York-based group said.

The supermarket, which operates 500 stores and employs about 118,000 staff in the UK, rebuffed a £5.5bn offer from the buyout firm Clayton, Dubilier & Rice (CD&R) last month, saying it was “far too low”. CD&R has until 17 July to either make a higher offer or walk away.

If approved, the £6.3bn bid led by Fortress will be the biggest private equity deal since the £11bn takeover of Boots in 2007. The deal also leans on the finances of Canada Pension Plan Investment Board and the billionaire US industrialists Koch family, which teamed up with Fortress to launch the bid.

The supermarket is believed to be drawing suitors because of its property footprint and the structure of its supply chain. Morrisons owns the freehold for 85% of its 497 stores, and prides itself on its 19 manufacturing sites including bakeries, abattoirs, fishing fleets and egg farms. The grocer has been a cornerstone of the UK’s food supply infrastructure during the pandemic and border disruptions due to Brexit.

Richard Hunter, the head of markets at Interactive Investor, said new bidders could still throw their hat into the ring.

“Apollo Global Management have confirmed that they are also considering an approach, having recently missed out on a deal to buy Asda,” he said. The private equity firm was ultimately outbid by the billionaire Issa brothers, who bought the rival supermarket chain for £6.8bn earlier this year.

“This could lead to a three-way bidding war, with some speculation that following on from its business relationship with Morrisons, Amazon could even emerge from left field as a surprise last minute entrant,” Hunter added.

 

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