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Britain's Morrisons Agrees To $9.54 Bln Acquisition Offer From CD&R

Britain's Morrisons Agrees To $9.54 Bln Acquisition Offer From CD&R
British supermarket Morrisons has agreed to be taken over by the United States based private equity group Clayton, Dubilier & Rice and accept the offer for a deal worth 7.0 billion pounds ($9.54 billion). Morrisons dropped its previous recommendation in support of a lower acquisition bid from a consortium led by Fortress Investment Group.
The offer from CD&R's offer is worth 285 pence a share which is much higher than the 272 pence a share offer from the Fortress Investment Group, a firm that is backed by Japan’s investment giant SoftBank, and which valued its acquisition deal at 6.7 billion pounds, said Morrisons, which had begun its journey way back in 1899 as an egg and butter merchant in 1899.
The market value of the British supermarket is at 9.7 billion pounds, including debt, according to the acquisition deal offer from CD&R.
Morrisons' board intends to recommend it unanimously.
In the British grocer industry, Morrisons is ranked fourth below the market leader Tesco and Sainsbury's and Asda. The deal for Morrisons is amongst the most high profile potential acquisition that has seen bids and counter bids and a trend that underscores the interest of the private equity in the British company.  
The agreed bid from CD&R represents a 60 per cent premium on the share price of Morrisons prior to the emergence of takeover interest in mid-June.
Morrisons had previously rejected a 5.52 billion pounds acquisition proposal by CD&, that currently has former Tesco boss Terry Leahy as its senior adviser.
Subsequently a bid from Fortress worth 6.3 billion pounds was recommended to shareholders by Morrisons which was then raised by the major shareholders of the company, including Silchester, M&G and Hambro, clearly stating that they wanted a higher bid.
Morrisons' existing management team led by CEO David Pottswill be retained by CD&R while allowing the company to execute the current strategy being followed by Morrisons. CD&R also did not plan any sale of Morrisons material stores and leaseback transactions, the private equity firm said.
"The Morrisons board believes that the offer from CD&R represents good value for shareholders while at the same time protecting the fundamental character of Morrisons for all stakeholders," said Chairman Andrew Higginson.
Potts, Higginson and Morrisons' chief operating officer Trevor Strain were also co-workers of Leahy at Tesco.
"CD&R is delighted to have the opportunity to support the management of Morrisons in executing their strategy to grow and develop the business," Leahy said.
CD&R currently has investments in multiple firms including in Motor Fuel Group, which operates 918 fuel forecourts in the UK.
Since Morrisons already owns and operates 339 fuel forecourts, CD&R, therefore, plans to set up a partnership for development of Morrisons' wholesale business and convenience store portfolio.
However, scrutiny Britain's competition regulator will be attracted by the forecourt overlap.
Morrisons shareholders will vote on CD&R's offer at meetings expected around the week starting October 4. A higher bid offer could still be placed by Fortress according to British takeover rules.
It was "considering its options" and called on Morrisons’ shareholders to not take any action on the CD&R deal offer, Fortress said.

Christopher J. Mitchell

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