Bidding war for U.K. grocer rages on

Consortium that includes Canada Pension Plan Investment Board has increased its offer to purchase Morrisons in an attempt to stave off competitors

A consortium led by U.S. private equity firm Fortress has increased its offer to buy Morrisons, Britain's fourth-largest supermarket chain, a move that it hopes will deal a knockout blow to a rival bidder.

In a statement Friday, Fortress said it was increasing its offer for Morrisons by £400 million to £6.7 billion (C$11.6 billion). Its previous offer had already been approved by the Morrisons board.

The consortium, which also includes the Canada Pension Plan Investment Board and Koch Real Estate Investments, said the offer represented a 52% premium on Morrisons' 178 pence per share price at the close before the first takeover proposal.

However, it said it had to go higher amid "speculation regarding a possible counter-offer" by Clayton, Dubilier & Rice, another group of investors.

Under British takeover rules, CD&R has to place a firm bid or walk away from the table by Aug. 9. Its previous offer of £5.5 billion pounds was rejected in July.

Morrisons' board urged shareholders to back the new offer at a special meeting on Aug. 16.

Morrisons employs about 110,000 people, operates 497 stores and 339 gas stations across the U.K.

Private equity firms typically acquire undervalued companies and then look for ways to cut costs and boost profits before selling them at a profit. British assets are widely considered to be cheaper than they otherwise would have been as a result of Britain's departure from the European Union and the coronavirus pandemic.

Morrisons appears an attractive opportunity for private equity as its value had been below its pre-pandemic levels despite strong recent revenues.

Morrisons was founded in 1899 as an egg and butter stall in a market in the north England city of Bradford. It steadily expanded and became a publicly-listed business in 1967. It expanded further in 2004 with the acquisition of rival Safeway, a move that grew its presence in the south of England.

The firm is now largely owned by a raft of institutional shareholders, including Silchester International, Columbia, Blackrock and Schroders. Many shareholders, including Silchester, had indicated they would vote against the initial offer from Fortress.

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