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LONDON (Reuters) – Shares in Morrisons jumped above the level of an agreed takeover offer from U.S. private equity group Clayton, Dubilier & Rice (CD&R) on Friday, indicating a protracted bid battle for the British supermarket may yet have further to run.
Late on Thursday, Morrisons said its board would unanimously recommend CD&R’s 285 pence a share offer worth 7 billion pounds ($9.54 billion) and drop its previous recommendation for a 6.7 billion pound bid from a consortium led by the SoftBank owned Fortress Investment Group.
But shares in Morrisons were up 4.6% at 292.1 pence at 0704 GMT, on hopes Fortress will return.
The battle for Britain’s fourth-largest grocer after Tesco (OTC:TSCDY), Sainsbury’s and Asda, is the most high-profile deal amid a raft of bids and counter bids playing out, reflecting private equity’s appetite for UK Plc.
Morrisons shareholders will vote on CD&R’s offer at meetings expected around the week starting Oct. 4.
Under British takeover rules, Fortress could still come back with a higher offer before those meetings.
It said on Thursday it was “considering its options” and urged shareholders to take no action.
If Fortress did want to come back, the Takeover Panel, which governs merger and acquisition activity in the UK, could instigate an auction process.
Analysts have speculated that Amazon (NASDAQ:AMZN), which has a partnership deal with Morrisons, could also still enter the fray, though most believe if it was interested it would have done so by now.
CD&R brings former Tesco boss Terry Leahy as a senior adviser and a takeover of Morrisons would reunite him with its Chairman Andrew Higginson, CEO David Potts and Chief Operating Officer Trevor Strain who all worked for him at Britain’s biggest retailer.
CD&R has committed to retain Morrisons’ existing management team and execute its strategy. It said material store sale and leaseback transactions were not planned.
CD&R’s current investments include Motor Fuel Group (MFG), which operates 918 fuel forecourts in the UK. Morrisons owns 339 fuel forecourts.
To build synergies, CD&R wants to open Morrisons branded convenience stores on MFG forecourts supplied with Morrisons goods.
However, the forecourt overlap will likely face scrutiny from Britain’s competition regulator.
($1 = 0.7337 pounds)
