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Bankers and advisers to collect £300m from planned Morrisons takeover

Bankers, financiers and other advisers are set to collect roughly £300m in fees from the planned £9.5bn acquisition of UK grocery chain Wm Morrison by a private equity consortium led by US fund Fortress Investment.

The payouts were revealed on Thursday as the UK grocer released detailed information for its shareholders, who are set to vote on the bid on August 16.

The document showed that Fortress expected to incur more than £263m of fees, with the costs of arranging £5.75bn of interim financing accounting for more than half of that. It also estimated £36m of payments to advisers and brokers and £17m on legal costs.

Morrisons, which traces its origins back to a Bradford market stall in 1899, expected to incur £49m of costs, mostly fees to advisers Rothschild and brokers Shore Capital and Jefferies.

The terms of Fortress’s bid do not require Morrisons to pay a break fee if it recommends a rival bid.

The grocer’s directors have already recommended Fortress’s offer.

But private equity firm Clayton Dubilier and Rice has been given until August 9 to table a counter offer for the grocer.

CD&R’s 230p a share proposal for the supermarket group was rejected in June.

The Takeover Panel, which regulates takeovers involving public companies in the UK, said on Thursday that CD&R must make its intentions clear by 5pm on August 9 unless a third party makes another bid before then.

Most observers regard that as unlikely after Apollo, another private equity firm, abandoned plans for a rival offer. Instead, it may join the Fortress consortium, which also includes a Canadian pension fund and a subsidiary of US conglomerate Koch Industries.

CD&R declined to comment on its intentions.

At least three-quarters of Morrisons investors that vote on the Fortress offer must approve the proposal, but some major shareholders have voiced concerns about aspects of the transaction.

Fortress can delay proceeding with the takeover in the unlikely event that the UK’s competition regulator refers the takeover for a detailed “phase 2” inquiry, or the UK government signals that it will use powers granted during the Covid pandemic to block it.

Fortress is broadly supportive of Morrisons’ existing management team, but said it would conclude a review of the company’s operations within the first six months of ownership, including its real estate strategy and executive remuneration arrangements.

It said investment in the business could include further acquisitions, and that it would be “assessing strategic options in respect of Morrisons’ portfolio of petrol filling stations”. 

These would also likely feature in any CD&R proposal given that it also owns Motor Fuel Group. Selling fuel makes very little profit for supermarkets, although the working capital it generates reduces their need to borrow while fuel-related promotions drive footfall to the stores.

Mohsin and Zuber Issa, the Blackburn-based brothers who along with TDR Capital acquired Asda from Walmart earlier this year, have already sold the group’s petrol operations to their own company.

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