Second shareholder comes out against Morrisons takeover
The US private equity firm seeking to take over Morrisons was fighting a rearguard action after a second shareholder came out against its £9.5bn bid.
Fortress is scrambling to get back on the front foot after top ten investor JO Hambro said that its 254p a share offer was too low. The intervention came a day after Morrsions' biggest shareholder Silchester said it was opposed to the deal.
Bosses at Fortress have now signed up Singapore's sovereign wealth fund GIC to join their takeover consortium and the firm is on the brink of agreeing a similar deal with rival buyout titan Apollo Global Management, in a move likely to fuel speculation that it will increase its offer.
City sources said that talks between Apollo and the Fortress-led group are in their final stages, but cautioned final terms were still being agreed and a partnership could fall through.
It is understood that GIC and Apollo both held preliminary discussions with rival private equity firm Clayton Dubilier & Rice (CD&R), which lodged a rival £5.5bn bid for Morrisons in June before it was rebuffed by the board.
CD&R, which is understood to be lining up former Tesco boss Sir Terry Leahy to become Morrisons chairman, is now in talks with lenders for a counterbid. The firm has until Aug 9 to make its intentions clear under City takeover rules.
Fortress is already backed by a Canadian pension fund and the real estate arm of US oil billionaire Charles Koch, with debt underwritten by HSBC and the Royal Bank of Canada.
Its swoop for Morrisons has won the support of the supermarket's board. But the takeover was thrown into doubt this week when Silchester, which has a 15pc stake in Morrisons, described it as disadvantageous for existing investors. It added: "There is little in the recommended offer that could not be achieved by Morrison as a listed company."
JO Hambro said: "We reiterate our view that any offer for the group approaching 270p-a-share merits engagement and consideration. With the share price as high as 269p in the last week, we believe the market shares this sentiment."
They added that the Fortress deal "falls short of this level".
The interventions could force Softbank-backed Fortress to raise its offer. The deal must be supported by 75pc of shareholders in a meeting on August 16 to go ahead.
GIC, which already has a 0.2pc stake in Morrisons, would provide £100m of fresh funding, giving Fortress more firepower to potentially increase its bid. It will provide the cash through via investment vehicle Cambourne.
The Singaporean fund has already ploughed money in UK property through tie-ups with British Land, including its previous ownership of 5 Broadgate in London.
One industry source said that GIC is "probably seeing the potential value extraction" in Morrisons' property empire, exacerbating concerns about a possible sale and leaseback deal.
Morrisons owns 87pc of the freeholds for its sites. It has been speculated that Fortress could seek to sell these off to raise cash, although the private equity firm has insisted it has no intention of making any major changes.
Silchester, which is run by a group of former investment bankers, said that in particular the grocer can extract value from its property portfolio without going private.
It said that Morrisons' site in Camden showed there is an alternative way to benefit from its property wealth. The supermarket sold this land to housebuilder Berkeley last year for £85m, and it has planning permission for about 450 homes and 100,000 sq ft of offices.
Shares in Morrisons closed flat at 266p, valuing the company at £6.45bn.
Reference: The Telegraph: Oliver Gill, Laura Onita