In what could be the biggest UK retail purchase in seven years, Morrison’s Supermarkets, Britain's no. 4 retailer, has contacted various private equity firms interested in a potential buyout. The Morrison family, which holds about 9.5% of the supermarket, has allegedly contacted firms such as CVC Capital Partners, Carlyle Group, and Apax Partners APAX.UL, according to Reuters. However, the latter refused to pursue a deal.
A buyout of Morrison’s would exceed 7 billion pounds ($11.5 billion), according to Bloomberg. Retail analysts and Morrison’s shareholders are skeptical that a deal would happen however, citing slow sales growth and the size of the deal.
Shares were down 18% over the last six months over concerns of the grocer’s weak trading, but rose nearly 5.4% last Wednesday – its greatest gain in a month. The Guardian reports that sales fell 2.5% in the 12 weeks to February 2 and analysts said this performance worsened to a 4% decline in recent weeks.
“Typically buyout firms approach shareholders rather than the other way around, so this aspect of the news reduces the likelihood of a deal in our eyes,” said analysts at Barclays.
Strangely, Sir Ken Morrison, the son of the company’s founder, claimed he knew nothing about a potential buyout, saying, “At my age I’m not thinking of returning,” according to The Guardian. The 82-year old stepped down in 2008 after building his father’s grocery store into a national chain.
Other analysts, like Clive Black at Shore Capital, argue that because of the low valuation, ideas of a potential buyout are likely to occur. “Given Morrison’s trading weakness and relatively low valuation, such headlines and potential initiatives are to be expected to some degree at this time,” he said. “Indeed, we would expect a number of serious private equity investors to be running the rule over Morrison’s.”
If Morrison’s does go private, Reuters also reports that it would likely slash capital expenditure and consider store disposals.
Stay tuned to AndNowUKnow as we continue following this developing story.
