The outcome of the £10bn battle to buy UK supermarket chain Wm Morrison will be decided in a one-day auction on October 2, the takeover regulator has ruled.
The Takeover Panel said on Wednesday that it would run up to five rounds of bidding on Saturday because neither of the two bidders — the Fortress Investment consortium and Clayton, Dubilier and Rice — which have been courting the UK’s fourth-largest supermarket chain since June, have declared their offers final.
Either bidder may make an increased offer in the first round. If neither does so, CD&R’s existing £9.7bn bid at 285p a share will win.
If there is a higher bid in round one, the other bidder can increase their offer in subsequent rounds. If no winner has emerged after four rounds, both parties may revise their offers in the final round. All revised proposals must be in cash and they will not be made public until the auction has finished.
To prevent a situation where equal bids are made, in the fifth round any increased offer lodged by Fortress must be at an even number of pence per share while CD&R must bid in odd numbers.
Morrisons’ board must make a recommendation in favour of one of the offers by the following Tuesday, October 5. It is currently recommending the higher CD&R offer and a shareholder vote on that bid has been called for October 19.
Both proposals are structured as “schemes of arrangement”, whereby Morrisons’ shareholders approve the cancellation of its existing shares and the immediate reissue of new shares to the successful bidder.
Three-quarters of the shareholders voting must approve the scheme for it to proceed. Some investors in Morrisons, notably its biggest shareholder Silchester, had voiced concerns about the initial 250p-a-share offer from Fortress but have made no further comment as the price has increased.
Either bidder may make a revised offer outside the auction process before 5pm on October 1, or announce that it does not intend to raise its bid — in which case the auction will not proceed.
Bidders may not introduce additional conditions or — other than price — alter the terms of their offers during the auction process. Both Fortress and CD&R have given extensive though not legally binding commitments to respect the legacy of Sir Ken Morrison, the son of the founder who turned the company from a small chain of Yorkshire supermarkets to a national group.
These commitments include not selling the group’s large freehold store estate, honouring existing commitments to pay front-line staff £10 an hour and strengthening guarantees for the Morrisons pension scheme.
The summer-long tussle over the group has been a fee bonanza for lawyers, investment bankers and public relations advisers. According to the scheme documents from both sides, Morrisons will spend about £56m on financial and legal advice, while CD&R’s bill is expected to reach about £63m. Fortress expects to spend £53m.
The successful bidder will also have to pay stamp duty on the acquisition of Morrisons shares and fees running into hundreds of millions of pounds to banks for arranging the debt to finance the deal as panic buying drains UK petrol pumps
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By Jonathan Eley