The share price of Morrisons soars 28% on takeover offer

Morrisons’ share price surged by around 28% after a US private equity company offered to buy the supermarket group for £5.6bn.

On Monday, shares closed at 229p, just below the 231p per share proposed by Clayton Dubilier & Rice.

Morrisons’ board rejected the offer, saying that it undervalued the business and its prospects.

However, there is speculation that the move might prompt others to bid for this group.

The UK’s fourth-largest supermarket chain, Morrisons, has nearly 550 shops and employs about 119,000 people.

The executive editor of the publication Retail Week, George McDonald, said CD&R’s proposal could reveal more bidders

He pointed to private equity companies Lone Star Funds and Apollo Global Management, interested in buying Asda.

He told the BBC that one of the exciting things about Morrisons is that it has a close relationship with Amazon.

Morrisons had a relationship with Amazon since 2016, and under the partnership, the supermarket sells food and fresh produce through Amazon’s website.

Amazon is the owner of the US supermarket chain Whole Foods and also has seven outlets in London.

Situation in Europe

Under UK rules, CD&R has a month to announce a company’s intention to walk away or bid. Its initial proposal for Morrisons offers 235p per share.

In addition to that, CD&R might take on Morrisons’ £3.3bn debt, taking the total value of almost £9bn.

However, Legal and General Investment Management, a top 10 shareholder in Morrisons, criticized the private equity company’s approach.

L&G senior fund manager, Andrew Koch, told the Financial Times that the retail sector, in general, seemed undervalued. He added that private equity seemed to be interested in Morrisons because it has a lot of property that they could use to generate cash to pay back to themselves.