Morrisons youngsters 'mull £7bn bid' but don't tell Sir Ken

 

Simon Neville
Thursday 13 February 2014 01:00
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Morrisons' chief executive, Dalton Philips, was under mounting pressure last night after revelations that the supermarket's founding family is in discussions with private equity groups to turn the business private again.

But Sir Ken Morrison – who worked for 40 years for the business founded by his father – said he had no knowledge of the negotiations and has said previously that he is vehemently against loading the group with debt.

"I was quite surprised to see it," he said of a Bloomberg report that family members had been talking with the buyout groups CVC, Apax Partners and Carlyle. "They [the family] will all have considered views on the performance of the business. I am honorary president, which means I don't have a vote, I am not consulted and I don't have views. It's not a job that I relish."

Analysts have suggested that any buyout – which would cost about £7bn – would probably lead to a sale-and-leaseback deal, because Morrisons owns around 453 freehold stores worth an estimated £6.58bn.

Sir Ken, 82, has also spoken out in the past about the dangers of sale-and-leasebacks, arguing that the company should keep control of its assets, leading to suggestions that negotiations with private equity groups are being conducted by a younger generation of the family, who control about 9 per cent of the group.

The pressure on Mr Philips will mount, with shareholders criticising him for not handing cash back to shareholders. The hedge fund Elliott Management, an activist shareholder, has already called on the company to start selling its freeholds.

The UK's fourth-biggest supermarket chain had a dreadful Christmas, including a profit warning last month after sales fell by almost 6 per cent. Sir Ken admitted that trading had been "very unsatisfactory".

Mr Philips has been playing catch-up with his rivals, with no website or convenience store presence until recently. Home delivery was launched only last month and serves just Warwickshire and parts of Yorkshire.

The share price has collapsed nearly 20 per cent in the last six months, leading to speculation that vultures could be circling.

If the private equity groups approached by the family are interested in a deal, they will need to work together to raise the funds. Reports suggest that Carlyle and CVC are in joint talks, while Apax is thought to have walked away.

Morrisons' problems were laid bare when data showed that sales had fallen 2.5 per cent, with market share also down, in the 12 weeks to February 2. Shares rose briefly following yesterday's news, but eventually closed down 2.5p at 237.8p.

Sir Ken started with Morrisons in 1952 and oversaw the 1968 float. He retired in 2008, gifting much of his £1bn stake to family members and trusts.

The family sold half their stake in 2011 for about £500m.

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