The New York-based private equity group Apollo Global Management is among the many potential counter-bidders circling Morrisons after the grocery store group really useful a £6.3bn provide from an American consortium over the weekend.

Shares in Morrisons are expected to surge on Monday following the acceptance of a suggestion led by the US funding fund Fortress, the proprietor of Majestic Wine. Apollo has appointed the funding financial institution Morgan Stanley to advise on a possible provide, whereas rival buyout agency Clayton, Dubilier & Rice (CD&R) is contemplating whether or not to launch a renewed bid after having a suggestion rejected by the board.

Morrisons, which operates 500 shops and employs about 118,000 employees within the UK, introduced on Saturday it will promote to the Fortress-led consortium in a high-stakes deal valuing the corporate at £6.3bn. Fortress and its companions would additionally tackle debt price £3.2bn.

After months of secretive talks, Fortress made four proposals earlier than its accepted provide reached a complete worth of 252p a share, as effectively as a 2p money dividend, in contrast with the retailer’s closing share worth on Friday of 240p.

Recommending the provide to shareholders, Andrew Higginson, the chair of Morrisons, stated: “The Morrisons directors believe that the offer represents a fair and recommendable price for shareholders which recognises Morrisons’ future prospects.”

But inside hours of the announcement, particulars of a possible counter bid from Apollo have been revealed within the Sunday Telegraph. It comes after the funding agency was overwhelmed in a race to purchase rival grocery store chain Asda earlier this yr, after it was sold to the billionaire Issa brothers for £6.8bn.

The permitted Fortress deal introduced on Saturday was the second agency provide for Morrisons, dwarfing the £5.5bn bid from CD&R final month, which Morrisons administrators rejected on 19 June, saying it “was far too low”.

Despite all of the events remaining tight-lipped on Sunday, CD&R, which has the previous boss of Tesco, Sir Terry Leahy, as a senior adviser, was stated by insiders to have “plenty more petrol in the tank”. It believes that some on the Morrisons board can be extra amenable to an elevated provide. Under UK inventory market guidelines the rival US funding agency has till 17 July to both make a agency provide or stroll away.

It raises the prospect of a three-way battle for the corporate that till lately was regarded as largely unloved by buyers, though it stays to be seen whether or not the opposite groups will high the Fortress-led provide.

Supermarkets have appeared susceptible to private bidders in latest months after share worth falls stemming from larger prices dealing with the Covid disaster, which cancelled out the advantages from booming gross sales throughout lockdowns.

Morrisons is taken into account engaging as a result of it owns the freehold on about 85% of its properties – together with its supermarkets – and for its built-in enterprise strategy. It has long-term relationships with its farmers and suppliers as effectively as its personal meals manufacturing websites and even its personal fishing fleet.

Andrew Gwynn, an equity analyst on the monetary agency Exane, stated he believedthe Fortress-led bid had probability.

“Fortress doesn’t seem to be proposing any aggressive change, with a focus on simply empowering the management team to deliver on their longer-term strategy. The deal is conditional on 75% approval from shareholders. We think that should be achievable at this price range. The deal is very likely to succeed,” he stated.

Shareholders, who’re but to approve the takeover, may discover their heads turned if one other celebration is available in with a considerably larger provide.

Institutional investor JO Hambro, which owns 3% of the grocery store, stated the Morrisons’ board was appropriate to reject the preliminary CD&R provide, however indicated it may again a deal at the next worth. “We believe any offer for the group approaching 270p per share merits engagement and consideration,” it stated simply final week. Before bid curiosity Morrisons had been buying and selling at about 178p a share, valuing the agency at about £4.3bn.

Meanwhile, farmers groups and the unions have raised the alarm, fearing the takeover can be dangerous information for his or her members. Morrisons describes itself as “British farming’s ­single biggest customer” and works instantly with greater than 2,200 livestock farmers and 200 growers – a few of whom have provided the corporate for greater than 30 years.

Workers union Unite stated it wished “unbreakable guarantees” on jobs and situations or it will not cooperate with any sale.

Adrian Jones, the nationwide officer for street transport at Unite, which represents Morrisons’ warehouse and distribution employees, stated the corporate was “unique among UK supermarkets” as a result of it owns its provide chain, in contrast to different supermarkets which rely extra on third-party wholesalers.

Labour’s shadow enterprise minister, Seema Malhotra, stated the federal government should closely scrutinise the takeover bid and known as on ministers to work with the consortium to guarantee “crucial commitments to protect the workforce and the pension scheme are legally binding, and met”.

If the deal goes via, the bid for the UK’s fourth-largest grocery store can be the largest private equity deal because the £11bn takeover of Boots in 2007. Saga, the AA and RAC are among the many big-name manufacturers which have fallen into the palms of private equity buyers lately.

It comes sizzling on the heels of a takeover of Asda which was backed by private equity group TDR Capital and led by the Issa brothers.

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