Britain's Morrisons agrees to CD&R's $9.54 billion takeover offer

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LONDON (Reuters) – British supermarket group Morrisons on Thursday agreed a takeover offer worth 7.0 billion pounds ($9.54 billion) from U.S. private equity group Clayton, Dubilier & Rice (CD&R), dropping its recommendation of a lower bid from a consortium led by Fortress Investment Group.

Morrisons said CD&R’s offer is worth 285 pence a share, trumping a 272 pence a share offer, worth 6.7 billion pounds, from the consortium led by Softbank-owned Fortress.

CD&R’s offer, which Morrisons’ board intends to recommend unanimously, gives the supermarket chain an enterprise value of 9.7 billion pounds once its debt is taken into account.

The battle for Britain’s fourth-largest grocer after Tesco (OTC:TSCDY), Sainsbury’s and Asda, is the most high-profile looming takeover amid a raft of bids and counter bids, reflecting private equity’s appetite for UK Plc.

CD&R’s agreed bid represents a 60% premium to Morrisons’ share price before takeover interest emerged in mid-June.

Morrisons’ shares closed Thursday at 279.2 pence, indicating investors expected a higher offer.

CD&R, which has former Tesco boss Terry Leahy as a senior adviser, had a 230 pence-a-share proposal worth 5.52 billion pounds rejected by Morrisons on June 17.

Morrisons subsequently recommended a bid from Fortress worth 6.3 billion pounds, which was then raised after major shareholders, including Silchester, M&G and Hambro, indicated they wanted more.

CD&R said it was committed to supporting Morrisons’ existing management team, led by CEO David Potts, and executing its current strategy.

“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.

CD&R’s track record of UK investments includes foodservice group Brakes Brothers and discount retailer B&M. Current investments include petrol forecourt retailer Motor Fuel Group (MFG) and industrial groups Wolseley (LON:FERG) and SIG.

Morrisons shareholders will vote on the offer at meetings expected around the week starting Oct. 4.

Under British takeover rules, Fortress could still come back with a higher offer.

A spokesman for Fortress had no immediate comment.

Analysts have speculated that U.S. giant Amazon (NASDAQ:AMZN), which has a partnership deal with Morrisons, could still enter the fray, though most believe if it was interested it would have done so by now.