Morrison (wm) Supermarkets Share Discussion Threads

[darkelf1] 06/8/2021 00:33

Does not look like amazon are going to come out and bid. Might all fall flat and get voted down.

[darkelf1] 05/8/2021 22:27

Looks like time is running out for a better bid to come through. Maybe there wont be one. Thought we would have heard by now. Mon 5pm is cutoff.

[loganair] 04/8/2021 19:27

Why private equity wants to take UK assets off the shelf - By Alec Mattinson:


The bidding war for Morrisons is expected to ratchet up with week with expectations of an imminent higher offer from CD&R putting pressure on the Fortress-led consortium and the Morrisons board.

The Morrisons board has accepted a 252p per share offer from Fortress and its backers, but a Sunday Times report suggested bids and counterbids could raise the level to 290p per share by the end of the bidding.

Even that – which would value the supermarket at just over £7bn – is short of fair value for the supermarket, according to cashflow analytics specialist Quest.

The division of Canaccord Genuity distinguishes itself from more conventional equity analysts by undertaking cashflow valuation analysis of companies for institutional investors – in effect, advising big investors on whether to accept bids for stocks they hold in their funds.

For Morrisons, it argued in a recent note the current bid levels remain materially lower than its own current adjusted value per share of 314p based on assumed cashflow returns.

Morrisons, it argues, is just one of a plethora of stocks being fundamentally undervalued by the market, which uses different valuation metrics to those private equity investors are employing.

“Private equity investors want to know what their return is,” says Quest director Graham Simpson. “They don’t care about PE ratios, DCFs and all of the other classical conventional valuation metrics.”

Ultimately, he says, PE investors want to know: “What is my annual return over the next three years and how does that compare to the cost of debt?”

Looking at UK-listed stocks through this lens, Quest identified particular opportunities for private equity to take undervalued assets at the small end of UK plcs. Some 177 stocks with a market capitalisation below £1.5bn have an leveraged buyout free cash yield above 10% – a key metric making them very attractive to a PE acquirer.

Under-pressure retailers are among those currently most undervalued – according to Quest’s research – with names such as Topps Tiles, Smiths News, Dixons Carphone and Halfords all having an LBO free cashflow yield of between 15% and 30%.

Perhaps most notably for the grocery sector, Sainsbury’s is the most attractive food retail name, with a LBO FCF of 15.3%.

Quest’s Simpson cautions that this current Sainsbury’s level is before a bid premium that would see it fall. For example, assuming a bid came in 30% higher this would see the Sainsbury LBO FCF yield fall to 12%.

However, this level remains “incredibly attractive”, he says.

“PE typically take a three to five-year outlook in their LBO models,” he explains. “Therefore, the return would be 12% per annum and you still own Sainsbury’s to which you can also apply typical PE levers such as improving working capital delaying paying creditors, reduce stock, strip capex down, run it lean, close stores, to extract further value.”

The big payday at the of this process, he says, is an ultimate exit and possible IPO having recouped plenty of the PE investment already during the ownership period.

McColl’s, currently at a LBO FCF level of 12.8%, is also picked out as representing value.

Meanwhile, among food suppliers Finsbury Food Group (14.4%), Wynnstay (14.1%), Carr’s Group (10.7%) and Stock Spirits (10.6%) are above the key 10% level, while in householder and personal goods Accrol (18%) also makes the cut.

“Finsbury Food is incredibly cheap on our 40-year DCF [discounted cash flow] model, which is more robust than outdated conventional valuation metrics that are point in time and look no further than the current or following year,” he explains.

He describes the current post-Covid differential between market and PE valuations as “unprecedented” and “shows the true extent of the UK plc undervaluation relative to global peers”.

“We do not see the current enhanced M&A interest in the UK plc slowing and we expect H2 2021 to be just as frenzied.”

The Morrisons bidding war may be just heating up, but it’s unlikely to be the last this year.

[tygwyg] 04/8/2021 19:00

Sure it's not the Market bidco approach?

[pjleeds] 04/8/2021 16:46

Looks like the railroad approach is being used.

[nerdlinger] 03/8/2021 17:23

This just in: Pelham started reducing their short position yesterday! Down to 1.5% from 1.65%.

[nerdlinger] 03/8/2021 17:04

If the takeover speculation carries into next month MRW will be back in the FTSE100, currently #79 and bigger than J Sainsbury according to last Friday's rankings:

[loganair] 03/8/2021 16:17

The Morrisons supermarket chain might have to break up if a planned £6.3billion takeover deal goes through.

A sale of Morrisons to private equity owners could trigger a break-up of the supermarket chain, analysts in the City have warned.

City analysts Bernstein said the new owners would need to sell off part of the supermarket to reclaim some cash.

Bernstein said buyers would struggle to make a profit "without significant asset sales”.

The shareholders, JO Hambro, Silchester and M&G own about 20% of Morrisons said the price wasn't high enough and had worries about how fast the sale was moving.

Fortress needs 75% of Morrisons shareholders to agree for the deal to go through at a meeting due on 16 August.

[tygwyg] 03/8/2021 11:56

Being old school... would be disappointed if a trade buyer wasn't in the mix.

[tygwyg] 03/8/2021 11:55

Expectations weighed down by years of mediocre performance oh and a 800k 'pr' budget no doubt being used to underpin the 'it ain't worth more without dismantling it' narrative. It is worth way more because that's why the vultures swooped in.

[ny boy] 03/8/2021 08:55

No just us!, rest are very shy.

I bought a couple of stakes in AO. @ 219p this morning, definitely an attractive entry in my books imo had a great pull back from last years 400p frothy stuff. Anyway door as usual.

[tygwyg] 02/8/2021 16:41

285 in sight... 3xx still onAny other believers?

[ny boy] 02/8/2021 16:20

Just sit back and wait for further bidding news

[loganair] 02/8/2021 12:59

Morrisons suitor CD&R poised to kick off bidding war - By Luke Tugby 2 August 2021:

Morrisons is bracing itself for a counter takeover offer this week as shareholder opposition mounts against Fortress’ £6.3bn bid.

Private equity giant Clayton, Dubilier & Rice (CD&R) is set to kick off a bidding war for the supermarket giant by submitting a counter offer, which could be lodged in the coming days.

[tygwyg] 02/8/2021 12:41

No major supermarket is buying big foot's just walk out tech... they will either buyout the tech they are investing in or roll it out in their own. Simple

[chinese investor] 02/8/2021 08:42

Fireworks this week methinks !

[goldpiguk] 01/8/2021 23:12

Hi,

For the last few years the 'big four' supermarkets have been on the backfoot. The rise of Aldi and Lidl (which now account for over 14% of the market) has squeezed ASDA, Sainsbury, Tesco, and Morrisons. Government competition rules have not helped and the whole sector now looks set for further massive changes over the next few years.

Very rough figures show that 'the big four' account for about 66.3% of the market and employ about 772,000 people. That is about 11,700 employees for each percent of the market.

By comparison Aldi and Lidl currently have c.14% of the UK market and employ about 57,000 in total, which equates to just over 4,000 employees for each per cent of the market.

The comparison is indicative only, but it is very easy to see why Amazon and Morrisons are setting up stores without checkouts or staff. The whole food retail sector looks set to become far more efficient, which should help keep down costs for customers and increase profits for shareholders. Ultimately the sector will employ fewer people, regardless of what happens to Morrisons.

I still hope Amazon will make a move on Morrisons, as I believe that would be in the best long term interests of customers, shareholders and employees. We will soon know!

Goldpig

[loganair] 01/8/2021 21:46

Analysts have warned that British supermarket chain Morrisons could be broken up if it is taken over by buyout firms.

Analysts at Bernstein said they “struggle to see” how Morrisons’ assets would not be stripped if the takeover proceeds at the current or a higher offer price.

An increase in the price would “put further pressure on potential new owners to sell off additional assets — factories, warehouses and stores”.

[loganair] 01/8/2021 21:43

Private equity firm Clayton, Dubilier & Rice (CD&R) is poised to come back with a new bid for Morrisons, stepping up a bidding war for the British supermarket chain, the Sunday Times reported.

The Sunday Times said CD&R was understood to have been preparing equity and debt financing for a counter bid that could come in the next few days.

If successful, CD&R would open Morrisons convenience stores at fuel stations operated by Motor Fuel Group, which CD&R owns, and it would work alongside the existing Morrisons’ management team, the Sunday Times said.

Britain’s Takeover Panel, which regulates corporate transactions, said last month it had given CD&R until Aug. 9 to announce a firm intention to make an offer or walk away.

[chinese investor] 01/8/2021 19:51

Private equity firm Clayton, Dubilier & Rice (CD&R) is poised to come back with a new bid for Morrisons, stepping up a bidding war for the British supermarket chain, the Sunday Times reported.

Morrisons rejected an unsolicited 5.52 billion pound ($7.68 billion) proposal from CD&R in June and this month backed a 6.3 billion pound offer from a group led by SoftBank Group Corp-owned Fortress.

The Sunday Times said CD&R was understood to have been preparing equity and debt financing for a counter bid that could come in the next few days.

If successful, CD&R would open Morrisons convenience stores at fuel stations operated by Motor Fuel Group, which CD&R owns, and it would work alongside the existing Morrisons’ management team, the Sunday Times said.

Britain’s Takeover Panel, which regulates corporate transactions, said last month it had given CD&R until Aug. 9 to announce a firm intention to make an offer or walk away.

A spokesman for CD&R declined to comment on the Sunday Times report.

Last week, British money manager M&G, which owns a 1.08% stake in Morrisons, joined criticism of the Fortress-led bid, saying it did not reflect the true value of the company.

Morrisons’ largest shareholder Silchester has also said it is not inclined to support the offer for Britain’s fourth-largest supermarket chain. Schroders Plc, also an investor in Morrisons, is still considering how it will vote.

A third private equity suitor Apollo Global Management said last month it would not pursue a solo offer for Morrisons but could join the Fortress consortium.

Shareholders in Morrisons are due to vote on the Fortress offer on Aug 16.

[tim 3] 01/8/2021 16:00

All bud related would be closer to £2 without it.

[tygwyg] 01/8/2021 14:38

285 in sight... 3xx still on

[gregmorg] 01/8/2021 10:36

Really I think you should look at your calculations a tad more closely. One off charges are exactly that. Also assets are a bankers dream to which leverage gets applied.
The current offer is just too low and fortunately the big shareholders have indicated their positions . I admit I am puzzled as to why the management supports this low offer as , to my mind, it has damaged their professional credibility enormously.Yet I suppose if it teases out much better offers then less so. But that can be a dangerous game. We will see what the next few weeks bring.

[arja] 01/8/2021 10:17

hard for me to understand why MRW is valued so highly as earnings do not even cover the dividend and a a very high p/e ratio ! But market is never wrong and a counter bid likely this week .