News & Analysis

Morrisons bidding roller coaster is a clever game and is working in the company's favour

Andrew Saks, Wednesday, 28 July 2021

There is nothing like being the centre of attention, and in today's media-focused, influencer-driven world, being bland, or a wallflower in the background just doesn't cut it.

Relying on keeping as many people talking as possible and generating as much interest in a subject as possible is a vital part of today's business environment. Being and staying relevant is a new element of lifeblood.

This is a trajectory that Morrison's, the large British supermarket chain that has benefitted from some extremely astute leadership over its illustrious 122-year lifespan, is an absolute case in point.

Time has passed since those endearing accent impersonations almost twenty years ago, aimed in jest at what was seen as a parochial northern grocery store operated by a seemingly parochial Yorkshire family when Morrison's expanded out of the borders of its home county into the national arena, and - shock - south of Watford Gap.

‘Eee by eck’, came the cacophony, along with anecdotes about flat caps and coal fires, however it was no longer a matter of amusement when Morrison's not only took the entire country by storm, but presented itself as a genuine challenger to the established, ultra-competitive British supermarket industry.

Today, that committed level of stoic pride has manifested itself once again, this time in the way the company has courted potential buyers and played a very clever game with bidders.

Today, just as a deal was about to be struck between Morrison's and Fortress for £6.3 billion, the company's largest shareholder, Silchester, has rejected any idea of proceeding on the basis that it, according to Silchester, undervalues the company.

This is of great interest because Morrisons' board of directors had initially rejected a high profile bid from private equity firm Clayton Dubilier & Rice a few weeks ago, calmly brushing off the offer whilst saying that it undervalues the company significantly.

The poker face was a clever move, and attracted two more very serious contenders, Apollo and Fortress. Apollo pulled out, leaving Fortress' bid of £6.3 billion on the table.

Now, with Silchester stating that this undervalues the company, it is kept relevant and in the focus of the entire investment world especially given the credentials of the three bidders so far.

This is perhaps why, when Silchester, which owns 15.1% of Morrison's vetoed the deal today, the share price did not move at all.

Investor confidence is high and not just in terms of overall acquirers, but in those looking at the publicly traded stock which is tradable on the London Stock Exchange's main market.

Ordinarily, acquisition targets that fail to secure any deal tend to plummet, but in this case, there is a profitable business in a highly competitive sector which has been the target of some very credible private equity firms which are willing to pay a high price, yet Morrison's tends to keep a calm lid on any temptation to sell so hastily.

This is a clever game and is currently working to their advantage.

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