Both Yorkshire grocers have been subjected to private equity takeovers in a done deal for Leeds-based Asda and a lot of speculation about the fate of Bradford-based Morrisons
Morrisons colleagues are waking up today wondering what on earth will happen to them now that three private equity firms are sniffing around their employer.
On Saturday, Morrisons board gave its blessing to a £6.3bn takeover deal which it said will protect the legacy of Sir Ken Morrison, Morrisons’ history and culture and its staff and customers.
The offer from Fortress, backed by Canada Pension Plan Investment Board and Koch Real Estate Investments, exceeds the £5.52bn proposal from US private equity firm, CD&R, which Morrisons firmly rejected, saying it was far too low. CD&R has until July 17 to announce a firm offer or walk away.
On Monday, a third private equity company, Apollo, said it is eyeing a takeover of Morrisons. Morrisons shares hit 267p on Monday morning, considerably higher than the Fortress offer of 254p as the market rubbed its hands in glee at the prospect of a bidding war.
The Morrisons board has approved the Fortress takeover, saying that both parties place very significant emphasis on the wider responsibilities of ownership of Morrisons.
Morrisons said these responsibilities include recognising the legacy of Sir Ken Morrison, Morrisons’ history and culture, and the important role that Morrisons plays for all stakeholders, including colleagues, customers, members of the Morrisons Pension Schemes, local communities, partner suppliers, British farming and the wider British public.
Fortress said Morrisons will operate as a standalone business, with its head office staying in Bradford, led by the Morrisons management team.
It added that it is committed to being a good steward of Morrisons and that existing employment rights will be fully safeguarded. It said it is also fully supportive of Morrisons’ recent pay award of at least £10 an hour.
Andy Higginson, chairman of Morrisons, said: “It’s clear to us that Fortress has a full understanding and appreciation of the fundamental character of Morrisons. This, together with the very clear intentions they have set out today, has given the Morrisons directors confidence that Fortress will support and accelerate our plans to develop and strengthen Morrisons further.”
Of course the problem here is the word “intentions”.
Private equity firms can make all sorts of promises and then break them as they see fit. Kraft made a raft of promises when it took over Cadbury, only to tear them up within weeks. We have toothless takeover rules that allow this to happen.
The Financial Times has pointed out that since the takeover of defence giant Cobham by private equity group Advent 18 months ago, the US giant has sold more than half the constituent parts, leaving Cobham with no UK manufacturing sites.
The parts have continued to operate in the UK under their new owners but are no longer held by Cobham and the major technologies Cobham once had no longer belong to UK owners.
Something has to change if we are to protect our great British companies.
Seema Malhotra, Labour’s shadow minister for business and consumers, said Britain’s supermarkets provide an essential national service and ministers must urgently work with Morrisons and the consortium to ensure that crucial commitments to protect the workforce and the pension scheme are legally binding, and met.
Intentions are all well and good, but the Government must ensure that private equity firms can no longer break their promises.
Morrisons’ 110,000 colleagues, who have been hailed as heroes during the pandemic for providing a vital service, deserve no less.
The rules need to change to protect them if we are to ensure that Morrisons doesn’t become another Cobham.