The bidding war for the UK’s fourth largest supermarket is over with Clayton, Dubilier and Rice (CD&R) snapping up WM Morrison for GBP 9.75bn. The deal ends a battle that stretched through the summer with two rival US private equity houses in the running for the retailer.
The winning bid of 287p a share was 2p a share above CD&R’s existing offer and just a penny above the 286p offered by rival consortium led by SoftBank-owned Fortress Investment.
While the deal is positive for shareholders, it also represents a win for Morrison’s pension fund trustees who had insisted on additional funding for the scheme. The supermarket has two schemes, both of which are in surplus, but the trustees were targeting buyout with an insurance company which amounted to a GBP 800 million deficit. CD&R is understood to have promised additional security for the scheme – in the form of property assets – which helped convince trustees to back the deal.
The Morrison’s trustees are a reminder of the influence pension funds still yield over their sponsor’s corporate deals. However, pension consultant John Ralfe, suggested to the Financial Times, that the trustees should have demanded a cash injection rather than real assets, especially since CD&R has used significant amounts of debt to finance the purchase.
The deal is likely to complete this month and will mark the second big sale of a supermarket to the private sector. Asda moved out of the public listings when it was bought by the Issa brothers earlier this year.
The UK’s remaining publicly-listed supermarkets may be getting sweaty palms.