Morrisons £7bn takeover set for initial investigation by competition watchdog

The UK competition regulator has launched an initial investigation into the takeover of Morrisons by US private equity firm Clayton, Dubilier & Rice (CD&R).

David Potts, CEO of Morrisons, with Sir Terry Leahy.

It comes days after the Bradford-based supermarket was taken off the stock market following the £7bn acquisition.

The Competition and Markets Authority (CMA) has served an initial enforcement order on Morrisons, CD&R and Motor Fuel Limited, the forecourt giant also owned by the US investment group.

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In the order, the regulator said the parties must remain separate and hold off integration plans until the probe has taken place.

It is understood that the CMA is particularly keen to investigate whether there could be competition issues surrounding Motor Fuel's petrol station sites and Morrisons' own forecourts.

CD&R bought the Motor Fuel Group in 2015 for £500m and has grown the forecourt operator to around 900 filling stations across the UK.

Meanwhile, Morrisons operates around 335 fuel outlets, meaning CD&R would control more than 1,200 of the UK's roughly 8,000 petrol stations.

The CMA could investigate the deal in a similar fashion to its inquiry into Asda's takeover by EG Group owners Mohsin and Zuber Issa and private equity backer TDR Capital.

Asda agreed to sell 27 petrol stations to assuage concerns from the CMA that the company could raise fuel prices in these specific locations, which were in close proximity to EG group sites.

A spokeswoman for CD&R said: “As expected, the CMA has issued an Initial Enforcement Order and CD&R looks forward to working constructively with the CMA to address any questions they may have.”

The listing of Morrisons on the London Stock Exchange was suspended on Wednesday as its takeover was finally completed with the Bradford-based supermarket now in private hands.

The grocer was at the centre of a bidding war with US-based private equity firm Clayton, Dubilier & Rice (CD&R) prevailing with a bid of nearly £7bn.

The takeover was given the green light by 99.2 per cent of shareholders at a meeting last week.

On Monday, Morrisons and CD&R announced that the court had sanctioned the scheme of arrangement for the purchase of the business, which has now become active.

The listing of Morrisons shares on the London Stock Exchange’s Main Market for listed securities were suspended with effect from 7.30am on Wednesday.

Morrisons announced that chairman Andrew Higginson, Rooney Anand, Susanne Given, Kevin Havelock, Lyssa McGowan and Jeremy Townsend alll tendered their resignations and stepped down from the Morrisons board.

CEO David Potts, chief financial officer Trevor Strain and Michael Gleeson will remain on the board.

CD&R made an offer of nearly £7bn beating out a rival bid from Softbank-owned Fortress Investment Group at an auction process earlier this month.

The stock market’s Takeover Panel, which governs merger and acquisition deals in the UK and arranged the auction, held the auction with Fortress offering 286p per Morrisons ordinary share, while CD&R offered 287p.

CD&R’s victory marks a triumphant return to the UK grocery sector for Sir Terry Leahy, the former chief executive of Britain’s biggest supermarket chain Tesco, who is a senior adviser to the firm.

Sir Terry said: “We are very pleased to have received the approval of shareholders and are excited at the opportunity that lies ahead.

“The particular heritage, culture and operating model of Morrisons are key features of the company and we will be very mindful of these during our tenure as owners.

“We very much look forward to working with the Morrisons team, not just to preserve the company’s many strengths – but to build on these, with innovation, capital and new technology – helping the business realise its full potential and delivering for all of its stakeholders.”

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