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Morrisons’ share price will be in the spotlight today following the announcement that a consortium of private equity firms has agreed to acquire the company in a £9.5 billion deal. The consortium plans to purchase the supermarket chain for 252p per share, a 5% premium above Friday’s closing price of 239p. Other supermarket stocks to watch today include Sainsbury and Marks & Spencer.
What happened: Two weeks ago, it was reported that an American private equity firm had made an offer to acquire Morrisons, the UK’s fourth-largest supermarket chain. However, Morrisons rejected the offer, claiming it undervalued the business. This led to speculation that the private equity firm might increase its bid or that another entity might step in with an offer.
The latter scenario occurred on Saturday when a consortium led by Fortress, which is owned by the Japanese multinational Softbank, announced plans to acquire Morrisons. The consortium also includes the Canadian Pension Fund and Koch Industries.
If approved, this transaction will be the largest buyout since 2007 when KKR acquired Boots, which was later sold to Walgreens to form the Walgreens Boots Alliance.
Morrisons’ share price is expected to rise today, as some investors anticipate that CD&R might return with a higher offer. Additionally, other retail stocks could see gains as investors speculate on further acquisitions by private equity groups, which have significant funds available.
The four-hour chart shows that Morrisons’ share price surged two weeks ago when CD&R announced its acquisition plan. The stock remains more than 33% above its level before the deal was disclosed.
With speculation of a bidding war increasing, there is a chance that the shares could rise above the 152p mark, where they closed on Friday. However, a significant drop could occur if it appears that regulators might oppose the acquisition, given the reputation of private equity firms for negatively impacting retailers.