Supermarket shares rocket after Morrisons rejects £5.5bn bid

The ‘unsolicited proposal’ from a US private equity firm sparked speculation that Sainsbury’s or even Tesco might be targeted next.

August Graham
Monday 21 June 2021 08:46
A Morrisons worker
A Morrisons worker

Shares in the UK’s biggest supermarkets soared on Monday morning after Morrisons rejected a takeover bid from a US private equity giant.

Morrisons saw its share price increase by around a third soon after markets opened in London following a weekend of speculation around the future of the business.

On Sunday, Morrisons said it had been sent an “unsolicited, highly conditional, non-binding proposal” from Clayton, Dubilier & Rice, a New York-based private equity firm.

It rejected the offer after the board “unanimously concluded that the conditional proposal significantly undervalued Morrisons and its future prospects”.

But on Monday it appeared that shareholders thought CD&R might return with a higher bid. The original offer was for 230p per share, while shares were selling for 237p.

It means that investors are likely to be betting that a second bid, higher than 237p, will be on its way shortly – a practice known as risk arbitrage. The second bid could come from CD&R or from another suitor.

In Morrisons’ wake, shares in Sainsbury’s rose by 4.4%, Ocado had gained around 3%, and Tesco was trading up 2.7% shortly after markets opened in London.

The announcement of the bid sparked speculation that these businesses might also draw interest from big investors who have the resources to take the supermarkets private.

Nick Bubb, an independent retail analyst, said: “As noted by the FT today, CD&R aren’t going away and we suspect a deal can be done in the 250p-260p area, so it should be a lively day for the sector on the stock market today, with an additional focus on the bid potential for Sainsbury and Tesco as well.”

Any deal for Morrisons or the other supermarkets would follow the £6.8 billion buyout of Asda by the billionaire Issa brothers, which was approved by the competition watchdog last week.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in