(Bloomberg) — Apollo Global Management Inc. said Monday it’s considering an offer for Wm Morrison Supermarkets Plc, heating up a takeover battle for the U.K. grocer.
Morrison over the weekend agreed to a 6.3 billion-pound ($8.7 billion) bid from a consortium led by Fortress Investment Group. The Fortress offer trumped private equity firm Clayton Dubilier & Rice LLC’s earlier 5.5 billion-pound bid.
“This signals the biggest shakeup in the U.K. grocery sector for over a decade,” wrote Richard Lim, chief executive of Retail Economics, a U.K.-based consultancy.
The possible bidding war for Morrison underscores the interest in U.K. supermarkets after the 6.5 billion-pound buyout of Asda, the country’s third-largest operator. Private equity firms are trying to capitalize on a business model boosted during the pandemic thanks to increased grocery spending.
Morrison also owns about 85% of its almost 500 store freeholds as well as manufacturing sites, making it attractive to private equity bidders.
With Apollo signaling interest, Morrison shares are poised to surge on Monday. The company agreed to Fortress’s offer of 252 pence per share plus a 2 pence special dividend. Morrison’s shares last traded at 239.8 pence, valuing the company at about 5.8 billion pounds.
Last month, Morrison rejected Clayton Dubilier & Rice’s bid. The Fortress offer remains below the 270-per-share range that some top investors asked to entertain CD&R’s offer, but may tempt some investors.
“Shareholders may accept the offer, given the low sales and revenue prospects,” wrote Charles Allen, senior analyst at Bloomberg Intelligence. Still, he sees room for the bidding group to improve its offer.
Officials with CD&R declined to comment Saturday on their plans after the Fortress bid.
Read More: A $53 Billion U.S. Buyout Firm Leads Morrison Takeover Fight
A takeover of Morrison would be the largest buyout of a U.K.-listed company in at least 10 years, according to Bloomberg data. The Fortress bid could still face opposition from politicians concerned about a foreign takeover of the U.K. grocer. Morrison’s main union, Unite, has also demanded “unbreakable guarantees” on jobs and working conditions in any takeover of the company.
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