The investment giant announced late on Thursday evening that a deal to buy the Bradford-based retailer has been unanimously agreed by the listed firm’s board.
Morrisons directors have advised that shareholders back the latest offer, which values the business at 285p per share.
Shares in the company leapt by more than 4% to 291p in early trading on Monday, suggesting that investors expect the bidding war is likely to continue and a more expensive deal could be struck.
The supermarket chain had previously been set for a £6.7 billion takeover by a consortium led by another US private equity firm, Fortress, which owns UK wine retailer Majestic.
The retailer confirmed on Thursday that this agreement has now been withdrawn.
Oppidum Bidco – the name of the Fortress-led group – said it is now “considering its options” over whether to field another offer to buy the supermarket group.
It represents the latest stage of a lengthy takeover process that began in June, when CD&aR had an initial £5.5 billion approach rebuffed by Morrisons bosses.
In June, the board said the offer “significantly undervalued Morrisons and its future prospects”.
In the updated offer document, released at 9pm on Thursday, the company said it “recognises the legacy of Sir Ken Morrison, Morrisons’ history and culture, and considers that this strong heritage is core to Morrisons and its approach to grocery retailing”.
The private equity house, which will face less scrutiny than a stock market-listed business, said it “will support Morrisons in further building on these strengths” and suggested it had no plans to sell off its freehold stores.
Most supermarkets lease their sites, but Morrisons has famously resisted calls for several years to use sale and leaseback agreements to line the pockets of investors.
The City feared CD&R could be planning a similar move.
In an attempt to allay those fears, CD&R said Morrisons’ strengths “include its freehold property portfolio, which affords greater flexibility and operational control, as well as its vertical integration, which enables it to compete successfully on price and guarantee the quality of its products in partnership with local suppliers and farmers”.
New York-based firm CD&R is one of the most firmly established investors in the sector and has been advised by former Tesco chief Sir Terry Leahy over the past 10 years.
CD&R is also the owner of forecourt giant Motor Fuel Group (MFG), sparking initial speculation that it could strike a similar deal to the acquisition of Asda by EG Group founders the Issa brothers and private equity backers TDR Capital.