UK markets closed
  • FTSE 100

    7,051.48
    -26.87 (-0.38%)
     
  • FTSE 250

    23,608.79
    -221.39 (-0.93%)
     
  • AIM

    1,266.98
    -5.42 (-0.43%)
     
  • GBP/EUR

    1.1661
    -0.0022 (-0.19%)
     
  • GBP/USD

    1.3681
    -0.0040 (-0.29%)
     
  • BTC-GBP

    31,215.54
    +180.13 (+0.58%)
     
  • CMC Crypto 200

    1,067.20
    -35.86 (-3.25%)
     
  • S&P 500

    4,455.48
    +6.50 (+0.15%)
     
  • DOW

    34,798.00
    +33.18 (+0.10%)
     
  • CRUDE OIL

    73.95
    +0.65 (+0.89%)
     
  • GOLD FUTURES

    1,750.60
    +0.80 (+0.05%)
     
  • NIKKEI 225

    30,248.81
    +609.41 (+2.06%)
     
  • HANG SENG

    24,192.16
    -318.82 (-1.30%)
     
  • DAX

    15,531.75
    -112.22 (-0.72%)
     
  • CAC 40

    6,638.46
    -63.52 (-0.95%)
     

Morrisons' biggest investor will not support takeover deal

·3-min read
Morrisons
Morrisons

The biggest shareholder in Morrisons has come out against a £6.3bn takeover bid for the supermarket chain in an embarrassing setback for the grocer’s board.

Silchester, which owns a 15.4pc stake in Morrisons, said it is not inclined to back the bid from Fortress, a US private equity firm, and described it as “disadvantageous” for existing investors.

The intervention throws the takeover plans into doubt and is likely to spark questions over why Morrisons' directors were so quick to back the bid. One executive at a rival supermarket said that Morrisons is unlikely to get the deal over the line without Silchester’s backing.

The deal must be supported by 75pc of shareholders in a meeting on August 16 if it is to go ahead. So far, no investor has gone on the record in support of the proposal.

In a blunt dismissal of the rationale for the takeover, Silchester said: "There is little in the recommended offer that could not be achieved by Morrison as a listed company."

Silchester, which is run by a group of former investment bankers, said that in particular Morrisons can extract value from its property portfolio without going private.

The grocer owns 87pc of the freeholds for its sites. It has been speculated that Fortress could seek to sell these off to raise cash, although the private equity firm has insisted it has no intention of making any major changes.

Slichester said that Morrisons' site in Camden showed there is an alternative way to benefit from its property wealth. The supermarket sold this land to housebuilder Berkeley last year for £85m, and it has planning permission for about 450 homes and 100,000 sq ft of offices.

Slichester said: “Morrison’s management has successfully pursued other capital-light initiatives to leverage Morrison’s assets and supply-chain.

“We see further scope to improve returns on capital with these initiatives.”

The statement comes amid reports that rival private equity firm CD&R is lining up potential funding partners as it prepares an improved offer for Morrisons, after its initial £5.5bn bid was rebuffed by the board. CD&R has until August 6 to make its intentions known.

Morrisons chairman Andrew Higginson over the weekend hit back at claims of tensions within the supermarket’s boardroom about the prospect of a knockout bid led by former Tesco boss Sir Terry Leahy, who is a senior adviser for CD&R.

Other investors such as M&G and Legal & General have already warned that Morrisons is at risk of being loaded with debt and stripped of its property portfolio, and could be taken over for the “wrong reasons”.

Fortress bosses intend to launch a full review of the business within six months if a deal goes ahead.

Silchester was set up in 1994 by multimillionaire Stephen Butt, with former colleagues from Morgan Stanley including Michael Cowan and Bertrand Le Pan de Ligny.

The low-key firm, which has only a handful of partners, has quietly amassed stakes in a string of UK businesses such as BAE Systems, GlaxoSmithKline and Man Group.

It took a similar stance three years ago in the £4bn US private equity takeover of Cobham, when Silchester told the board that Advent’s offer was not good enough and it should think again. However, the Advent deal went ahead anyway.

An industry source said that Slichester’s decision not to back the deal “felt like people are trying to get an auction going”.

Fortress's £6.3bn bid is being backed by a Canadian pension fund and the real estate arm of US oil billionaire Charles Koch.

Earlier this month, investment firm Apollo said it was in talks to join the Fortress bid and would not make a separate offer for Britain’s fourth-largest grocer.

Morrisons and Fortress declined to comment.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting