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US buyout firm Fortress lines up £6.3bn Morrisons takeover

July 4, 2021

Retailer latest UK supermarket to be targeted by private equity investors

An investor group backed by a SoftBank subsidiary, America’s billionaire Koch family and others is positioning itself as the white knight riding to the rescue of Wm Morrison Supermarkets Plc.

Now comes the job of persuading investors, customers and politicians that a foreign private equity takeover of Britain’s fourth-biggest grocery chain is in their interests.

The supermarket operator agreed to a takeover for about £6.3bn ($8.7bn) from the consortium led by Fortress Investment Group after turnin down a lower bid from Clayton Dubilier & Rice in June. Although even higher offers may still emerge, Morrisons is already listing reasons to support Fortress.

“They are backing our management, our strategy and our people,” chief executive Dave Potts, 64, told Bloomberg News on Saturday. “Fortress can see the value in the Morrison’s business.”

Mr Potts also did a livestream with some of Morrisons 113,000 employees to discuss the Fortress offer.

Private equity's supermarket sweep

The fight for Morrisons highlights continued interest in Britain’s supermarkets following the £6.5bn buyout of Asda in March

Private equity investors want to capitalise on the improving fortunes of leading chains after lockdowns triggered a surge of in-store and online grocery spending.

A takeover of Morrisons will be the largest buyout of a UK-listed company in at least a decade, according to data compiled by Bloomberg News.

Announcing its agreement Saturday, Fortress outlined commitments that included maintaining pay and pensions for Morrisons employees in an attempt to head off political opposition to the deal.

UK politicians have already called on the government to intervene in any takeover for the grocer.

Unite, the labour union representing Morrison workers, called for urgent talks with the grocer’s management to seek guarantees on topics including jobs in response to the Fortress buyout.

“We won’t allow another takeover of a strong UK business and see the workers trampled over as the boardroom and shareholders stampede towards their bonanzas,” Unite said in a statement.

The makings of Fortress

Wes Edens, co-CEO of Fortress, is already an investor in the UK as the joint owner of the Premier League soccer club Aston Villa.

Founded by Edens and Randy Nardone in 1998, Fortress has operated independently from SoftBank Group since Masayoshi Son’s conglomerate bought it for $3.3 billion in 2017.

The firm counts former Goldman Sachs Group Inc. banker Christopher Linkas and ex-Deutsche Bank AG analyst Rahul Ahuja among its London staff, according to LinkedIn. It has about $53 billion in assets under management.

Morrison hasn’t yet spoken to the government about the Fortress deal but intends to start the process now, a person familiar said. In its statement, the firm said it doesn’t intend to carry out any material sale-and-leasebacks of Morrison almost 500 stores.