Bloomberg reports that US buyout group Clayton, Dubilier & Rice LLC has chosen a soft target in approaching Wm Morrison Supermarkets Plc with a £5.5 billion ($7.6 billion) takeover proposal. The UK grocer says the price is too low. But its defences are weak and it could have a fight on its hands to stay independent.
The only surprise about CD&R’s 230 pence per share approach is that it has taken so long for a bidder to emerge. Pandemic shopping habits combined with lackluster share price performances have made grocers alluring buys. Morrison is the smallest of Britain’s so-called big four supermarkets and has all the ingredients to be an attractive private-equity target.
There’s almost £5.8 billion of freehold property on Morrison’s books, compared with a market capitalisation of £4.3 billion pounds on Friday. The share price has underperformed the FTSE All Share Index over the past two years, even amid a turnaround under Chief Executive Officer David Potts. Management has been criticised for receiving high pay despite the poor shareholder returns.