Morrison Seeks Auction to Decide Between Fortress, CD&R Bids

(Bloomberg) -- Wm Morrison Supermarkets Plc called for an auction to settle whether Fortress Investment Group or Clayton Dubilier & Rice LLC acquires Britain's fourth-largest grocer. 

Morrison said Wednesday that because neither bidder has declared their bid final, it's in talks to arrange an auction ahead of meetings with shareholders around mid-October. Fortress said it's still considering its options.

Shares of the supermarket operator rose as much as 0.7% to 293.20 pence. They have been trading ahead of CD&R's top bid of 285 pence a share for two weeks.

News of the auction is the latest twist in the heated battle for Morrison, which is attracting buyout interest because of the large amounts of cash it generates, as well as its real estate portfolio. 

The fight to control Morrison has been under way since June, when news emerged that U.S. private equity group CD&R had made an initial unsuccessful approach. Since then, the grocer first recommended a 6.7 billion-pound ($9.2 billion) offer from rival private equity group Fortress, before switching to back a 7 billion-pound proposal from CD&R. 

Rare Process

Auction processes for public acquisitions are rare in the U.K., although the country's takeover panel did recently propose one for the contested battle over U.K. asthma drug maker Vectura Group Plc. That auction never went ahead, however, as one bidder pulled out before it began, clearing the way for tobacco giant Philip Morris International. 

Earlier in the year, an auction was held during the bidding war for U.K. security firm G4S Plc, pitting off suitors Allied Universal Security Services LLC and Garda World Security Corp. 

Although CD&R's offer is the highest currently on the table, Fortress has not walked away from the process, meaning it can still come back with a better offer. An accelerated auction process will help determine the highest final price each party is prepared to offer. 

Shareholders will have the final vote to decide what will be Britain's biggest take-private deal in at least a decade, according to data compiled by Bloomberg. The grocer is scheduled to report first-half results Thursday, with analysts expecting a 29% gain in adjusted earnings per share.

Fortress is leading a consortium that also includes America's billionaire Koch family, the Canada Pension Plan Investment Board and Singapore sovereign wealth fund GIC.

©2021 Bloomberg L.P.