Private Equity Spots Bargains in U.K. Supermarket Aisles
- Date: 05-Jul-2021
- Source: The Wall Street Journal
- Sector:Financial Markets
- Country:Middle East
Private Equity Spots Bargains in U.K. Supermarket Aisles
Walmart executives must be upset. Months after the retail giant sold a majority stake in its British grocery chain Asda at a mediocre valuation, U.K. supermarkets are suddenly hot property among private-equity firms.
A bidding war is brewing for Britain’s fourth-largest food retailer by market share, WM Morrison. On Saturday, the company’s management gave the thumbs-up to a £6.3 billion all-cash takeover proposal by SoftBank Group -backed buyout firm Fortress Investment Group—equivalent to $8.7 billion at current exchange rates. But that probably isn’t the end: Private-equity giant Apollo Global Management said Monday that it might make a rival offer. Morrisons has already rejected a £5.5 billion offer from a third suitor, Clayton, Dubilier & Rice.
The Fortress proposal represented a 42% premium to the grocer’s undisturbed share price. The stock is trading above this level in a sign that investors expect higher offers. Private-equity firms clearly think that years of intense competition and sterling’s poor performance since the Brexit referendum have left British supermarket stocks too cheap.
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