Morrisons could be taken over for wrong reasons, warns Legal & General


Wm Morrison Supermarkets PLC (LON:MRW) could end up in private equity hands for the “wrong reasons”, warned the investment arm of Legal & General Group PLC (LON:LGEN).

Apollo Global Management confirmed on Monday it’s considering putting an offer forward, days after the grocer told shareholders to approve a GBP6.3bn offer from Fortress Investment.

READ: Morrisons takeover is about property not grocery, experts say

Two weeks ago, the FTSE 250 group turned down a GBP5.5bn takeover approach from Clayton, Dubilier & Rice, which may as well come back with a new proposal.

“As responsible stewards of our clients capital, it is important that the company isn’t taken over for the wrong reasons. If an acquirer makes strong returns this should come from making the company a better business. It should not come from buying its property portfolio too cheaply or levering the company up with debt,” said Andrew Koch, a senior fund manager at Legal & General.

He said that there are “more questions than answers” and said Morrisons should release more details on the current value of its properties.

“The company has thus far disclosed little information about the current value of its properties, both the retail stores and the distribution assets. Given this is an agreed bid, it is likely that Fortress and their partners have had more information than others on this. Investors need to have the detailed figures to be able to make a considered decision regarding the right future for the company and their shareholdings,” he added.

Legal & General Investment Management is the group’s eighth-largest shareholder with a 2.8% stake.

“With three declared bidders (CD&R, Fortress and Apollo) and a recommended offer (Fortress) it seems probable to us that Morrison will be taken private. The question is for how much and by whom? Whilst acknowledging the challenges of second guessing the bidding parties, we think Fortress could raise its offer to 275p per share and still drive an IRR in excess of 15%,” analysts at Citigroup noted.

“Moreover we believe CD&R could leverage synergies with its fuel forecourts to drive at least 20p per share of additional value.”

Shares in the company were flat at 266.64p on Tuesday morning, having climbed 51% in the past month.

–Adds Andrew Koch statement–


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