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On 28 July 2021, it was announced that GIC Private Ltd (GIC), a sovereign wealth fund established by the Government of Singapore, joined the £6.3bn recommended Fortress-led consortium offer for Wm Morrison Supermarkets plc (Morrisons). GIC may not be the only institutional investor joining the consortium, with Apollo Global Management, Inc. (Apollo) withdrawing its intention to make a solo bid and announcing that it had begun preliminary discussions with Fortress.
One day prior to the announcement of GIC’s joinder to the consortium bid, Silchester International Investors LLP (Silchester), Morrisons’ largest shareholder with a 15.14% shareholding, voiced their opposition to the Fortress offer. Silchester criticised the offer for not providing anything that could not be achieved by Morrisons as a listed company and the choice to structure the offer as a scheme of arrangement. Silchester pointed to the scheme as a barrier to a sufficient bidding war from emerging, given the restricted timetable in which potential offerors would have to abide by. The court meeting and general meeting to approve the scheme is scheduled for 16 August 2021.
Silchester is not the first institutional investor of Morrisons to question the Fortress-led offer. Top ten shareholder Legal & General (2.8% shareholding) previously argued that shareholders needed more information about Morrisons’ property portfolio to make the right decision for the future of the company. Following news of GIC’s joinder, J O Hambro re-iterated its previous criticism that only an offer worth £6.5bn or more was worth merit and consideration, though has now reduced its previously held 2.97% shareholding to 1.90%. With a potential 19.84% of votes against the Fortress offer at the 16 August 2021 meeting, the scheme may not pass with the requisite majority of votes (75%).
Morrisons’ share price has continued to trade at a premium to the recommended offer price of £2.54 per share, closing at £2.66 per share at close of business on 28 July 2021. This suggests that the Fortress-led consortium bid undervalues the company and that investors expect a higher offer to be submitted to the table. Although Apollo has dropped out of contention for submitting a rival bid, Clayton, Dubilier & Rice (CD&R), the private equity firm that sparked the offer period, has until 9 August 2021 to submit a higher bid or withdraw its interest. Further, with the addition of GIC (and potentially Apollo) and investor pressure, the consortium may update their bid with an increased offer.
When the deal for the Fortress-led consortium was first announced, there were concerns that there may be government intervention, with business secretary Kwasi Kwarteng set to meet with Morrisons’ chairman to discuss concerns. Following discussions with Morrisons, in an appearance on LBC, Kwarteng squashed those concerns and voiced his support of the foreign private equity interest in Morrisons. Kwarteng stated that the deal represents a ‘vote of confidence in the UK’ and described foreign purchasers of UK assets as not inherently ‘a bad thing’ as it attracts capital and investment which creates jobs.
The takeover interest in Morrisons encompasses a number of trends seen in our Public M&A H1 2021 Market Tracker Trend Report; P2P transactions, P2P transactions being structured as consortium bids, overseas bidders and increased shareholder engagement (see: Market Tracker Trend Report: Trends in UK public M&A in H1 2021).
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Market Tracker is a unique service for corporate lawyers housed within Lexis®PSL Corporate. It features a powerful transaction data analysis tool for accessing, analysing and comparing the specific features of corporate transactions, with a comprehensive and searchable library of deal documentation across 14 different deal types. The Market Tracker product also includes news and analysis of key corporate deals and activity and in-depth analysis of recent trends in corporate transactions.
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