Apollo Withdraws Offer For Morrisons, But May Join Fortress-Led Offer

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Morrisons private equity bidder Apollo withdraws solo bid for supermarket group but looks to join £ 6.3bn rival Fortress

  • Morrisons initially rejected a £ 5.5bn takeover bid from Clayton, Dubillier & Rice
  • Apollo said earlier this month he was considering an offer for the supermarket
  • Latest Apollo approach could temper a potential bidding war for Morrisons

Apollo Global Management has said it will not make a takeover bid for Morrisons but may join the consortium whose £ 6.3bn offer for the grocer was accepted earlier this this month.

The private equity giant said it was in “preliminary talks” with Fortress Investment Group, which could temper a potential bidding war between rival investment firms for the supermarket chain.

Morrisons’ first takeover offer this year came from New York-based Clayton, Dubillier & Rice (CD&R) in June, but it rejected the £ 5.5bn deal over fears the offer could is too low.

Change: Apollo said earlier this month it was considering buying Morrisons, but has now said it could join the Fortress-led consortium’s bid for the supermarket

But soon after, he agreed to a 254 pence per share offer led by Fortress, owned by Softbank, and also including Koch Real Estate Investments and the Canada Pension Plan Investment Board (CPPIB).

Within 48 hours, however, Apollo said he was considering buying Morrisons, which sent the supermarket’s stock price up 11%.

He has now withdrawn from a takeover bid and has entered into new discussions which he believes “could result in the funds managed or advised by Apollo being part of the investment group led by Fortress for the purposes of of the Fortress offer “.

“As a result of these discussions, Apollo confirms that it does not intend to make an offer for Morrisons other than as part of the Fortress Offer.”

He added: “Apollo notes Fortress’s intentions with respect to the Morrisons company and all of its stakeholders, as set out in the announcement of Fortress’s offer … If these discussions resulted in a transaction, Apollo would fully support the intentions. statements of Fortress regarding Morrisons. ‘

Politicians have raised concerns about the takeover and warned that any new owner could strip assets and reduce workers’ rights.

The chairman of Parliament’s trade, energy and industrial strategy select committee has written to the UK competition body asking what powers it has to ensure that consumers and supermarket workers are protected against any future deals.

There is also growing concern that foreign private equity firms will take advantage of the relatively low price of UK firms to buy them at a discount.

Domestic concerns: There is growing concern that foreign private equity firms will take advantage of the relatively cheap price of UK firms to buy them at a discount

Domestic concerns: There is growing concern that foreign private equity firms will take advantage of the relatively cheap price of UK firms to buy them at a discount

Among those ripped off this year are St Modwen Properties, which agreed to a £ 1.27 billion approach from Blackstone, infrastructure investor John Laing, Signature Aviation and Butlin owner Bourne Group.

Morrisons is viewed as a good target by private equity firms as it owns the vast majority of freehold ownership in its stores and has a large manufacturing supply chain.

Fortress stressed that it intends to continue operating with the same management team, has not sold any of its freehold or long-term lease properties after purchasing Majestic Wines in 2019 and “does not consider not to engage in significant “store sale and leaseback” transactions at Morrisons.

Susannah Streeter, investment analyst at Hargreaves Lansdown, said shareholders would find Apollo’s latest move “disappointing” because it means the value of the Fortress-led takeover is unlikely to be increased.

Shares of the Bradford-based supermarket were flat early in trading this morning, falling just 0.15% to 261.6 pence. Nonetheless, its shares have grown another 44% so far this year.

Streeter added: Morrisons’ ‘Fortress’ valuation valued the grocer at around £ 6.3 billion and was a 42% premium to the share price before the deal began. If Apollo can close the deal at the current lower price, why wouldn’t it?

“The increase in private equity activity in London in recent months means there may be more arms raised in the auction room, but for now Morrisons is back to courting a single suitor.”

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