- Fortress ups the ante
- Eyes now on CD&R
We highlighted the investment case for WM Morrison (MWR) back in February, when shares in the grocery chain were changing hands at 177p. Hopefully, some of our readers decided to take a position in the group, perhaps driven by the 4.2 per cent prospective dividend yield then on offer.
If so, they’re also in line for a sizeable capital return as the consortium led by Fortress Investment Group has increased its takeover offer for the grocer to 270p a share plus a further 2p a share special dividend, valuing Morrisons at around £6.7bn.
Morrison’s board had been rather keener on the previous bid of 254p than some of the group’s shareholders, most notably Silchester International Investors, which owns a 15 per cent stake. Resistance from a shareholder with that much clout would stand as a major impediment to gaining the required 75 per cent approval from the shareholders’ vote on 16 August.
It may be that Silchester was trying to ignite a bidding war, as Morrisons has been in the frame since June when private equity firm Clayton, Dubilier & Rice (CD&R) proposed an offer worth £5.5bn, or 230p a share. CD&R has until 5.00pm on Monday 9 August to make a renewed bid.
Shares in Morrisons had settled at 278p, having gained 2.2 per cent in early trading, but it is difficult to say whether the market has been pricing-in the prospect of an enhanced alternative offer, although that remains a possibility. At any rate, the board has again recommended that shareholders should take the money and run. But they may well be hoping that CD&R will re-enter the fray, though that might require deep pockets. Fortress is controlled by Japan’s Softbank and the consortium includes the Canada Pension Plan Investment Board, Singapore’s sovereign wealth fund, and Koch Industries. The shares have gained around 50 per cent over the past 12-months and are trading at a five-year high. Accept.
Last IC view: Buy,176.6p, 11 Mar 2021
