Morrisons shareholders will reach a decision following auction in October
Morrisons has reported a fall in profits on Thursday, however it has been overshadowed by ongoing talks with both of its US private equity suitors, in addition the UK’s Takeover Panel.
In August, the grocer’s board recommended that shareholders get behind an offer by Clayton, Dubilier & Rice (CD&R) that would value the supermarket chain at £7bn.
However, rival private equity firm Fortress, which has had previous offers usurped by CD&R, could yet make an improved bid.
Morrisons confirmed via a statement that is is operating with the view that either firm could make an offer that is “further increased or otherwise revised, a competitive situation continues to exist”.
Following an auction set to take place on 18 October, the supermarket chain will reach a decision on whether to recommend the CD&R or Fortress offer to its shareholders.
While there are no certainties in life, Susannah Streeter, senior investment and market analyst Hargreaves Lansdown said “it looks like the higher bid from Clayton Dubliier and Rice might now be on a smooth conveyor belt to approval with the company recommending its offer of 285p per share.”
“There is of course still a chance Fortress will wade in with a higher offer and these latest results will offer plenty of food for thought over whether an even higher bid is justified. There is a disappointing headline number with profit before tax and exceptionals falling 37% to £105 million in the first half. The closure of in-store cafes and lost sales in fuel and takeaway snacks was an £80 million hit and extra Covid expenses nibbled away another £41 million.”
Morrisons believes these troublesome costs will largely evaporate in the second half and profit for the year will beat last year’s £431 million.
“Certainly two year like for like sales growth of 8.4% is encouraging,” says Streeter.
“Also the acceleration of the Morrisons rebrand roll out to McColls stores and the expansion of Morrisons on Amazon is a welcome trend, with opportunities to significantly increase online sales. But there could be hiccups on the way to a higher profit trajectory, given the looming supply chain issues for the industry. Morrisons says it has a plan up its sleeve to mitigate potential cost increases, and stock shortages, but it’s hard to forecast just how tough the next few months may be. However with uncertainty looming Morrisons won’t want to look past its sell by date, so there is likely to be intense focus now on getting a deal signed, sealed and delivered .’’
The Morrisons share price is up by 0.14% during the morning session on Thursday.
