The Bradford-based supermarket chain Wm Morrison, with its unique ownership model that takes in a supply chain that stretches from farm and fishing fleet to table, holds a special place in the life of Britain.
And so the speed and naivety with which a feeble board at the supermarket group has unanimously approved a bid worth £6.3billion from a consortium led by private investment group Fortress is deeply disturbing.
Headed by former Tesco executive Andrew Higginson, Morrisons is accepting the buyer’s pledges to preserve the legacy of founder Ken Morrison.
This in spite of the presence within the bidding group of family-controlled Koch Real Estate, an offshoot of one of the US’s most notorious polluting companies and a backer of eccentric far-Right causes.
The battle for Morrisons kicked off a fortnight ago when the company received an unsolicited bid from the London arm of private equity group Clayton, Dubilier & Rice.
Headed by former Tesco executive Andrew Higginson, pictured, Morrisons is accepting the buyer’s pledges to preserve the legacy of founder Ken Morrison
Instead of repulsing the marauding buccaneers, the Morrisons board – apparently taking scant regard of the broader interests of work colleagues, suppliers, consumers and Britain’s food security – bowed to the foreign money men without reservation.
We should not be surprised. On past form, debt-fuelled bids which turn publicly quoted companies private trigger eye-watering payouts to existing executives in the tens if not hundreds of millions of pounds.
The would-be buyer, a group of investment funds led by Fortress, which bought Majestic wine stores in the midst of the pandemic, recognises that even if they can convince shareholders that the bid is a great deal they could face ferocious opposition from the political establishment and the food and farming industries.
Morrisons is unusual among the big four supermarket chains in sourcing its fresh produce, meats and even fish from its own farms, food-production centres and fleets across the country.
Any disruption to this model, as the owners pay down billions of pounds of debt, could be hugely damaging to British agriculture.
At first glance, the Fortress consortium – which includes a Canadian pension fund – might look a benign owner but Fortress itself is an offshoot of Softbank, a conglomerate run by Japanese wheeler-dealer Masayoshi Son.
Morrisons is unusual among the big four supermarket chains in sourcing its fresh produce, meats and even fish from its own farms, food-production centres and fleets across the country
At first glance, the Fortress consortium – which includes a Canadian pension fund – might look a benign owner but Fortress itself is an offshoot of Softbank, a conglomerate run by Japanese wheeler-dealer Masayoshi Son
The billionaire investor is best known in Britain for grabbing Cambridge’s top technology firm Arm Holdings for £24.3billion in 2016, with promises to the Cameron and May governments to invest for the long term.
Ken Morrison is pictured above
Instead Masayoshi Son sold off the Chinese subsidiary to Beijing investors, triggering a bitter row, and is seeking to sell Arm to US semi-conductor rival Nvidia. If that record is not disturbing enough, the Fortress consortium includes Koch Real Estate, part of the Koch Industries empire.
The origins of that business can be traced back to Stalin’s Russia and Hitler’s Germany, according to a book by Wall Street Journal reporter Jane Meyer. She found that the Koch family’s core beliefs, which include the ideas that taxes are tyranny, government oversight of a business is an assault on freedom, and climate change is a hoax, has led them into funding organisations and campaigns which challenge the very foundations of American democracy.
In an effort to woo public opinion, Fortress has declared that it is buying Morrisons for the long term, and promises that it will keep the company HQ in Bradford, and look after its workforce of 112,000. It adds that it does ‘not intend’ to make changes to pensions benefits. We know from past foreign takeovers of UK companies that such pledges are rarely kept.
When Cadbury was taken over by Kraft (now Mondelez), it immediately set about closing factories it promised to keep open and moved production of the Wispa bar to Poland.
It was the same when the private equity group Advent acquired the aerospace pioneer Cobham. In spite of promises to protect the UK’s national security, it proceeded to dismantle the business.
Among Britain’s grocers, Morrisons is a particular attractive target because it owns 87 per cent of the freeholds on its properties and is ripe for a form of asset-stripping which involves selling off stores and factories and then leasing them back.
The supermarket group has also invested heavily in online retailing via supply partnerships with both UK-owned Ocado and the American giant Amazon.
There have even been suggestions that Jeff Bezos, the billionaire owner of Amazon, might be tempted to launch his own bid for Morrisons to protect his supply deals.
This in spite of the presence within the bidding group of family-controlled Koch Real Estate, an offshoot of one of the US’s most notorious polluting companies and a backer of eccentric far-Right causes. Charles Koch is pictured above
We should always be fearful of foreign private equity and investment groups bearing gifts. Invariably, their ultimate aim is to pay down the debt on their acquisitions by cutting costs and investment in order to reward their backers as quickly as possible.
One of the inevitable consequences of this behaviour for the Exchequer is the disappearance of tax revenues. Buyout groups almost always switch the domicile of their acquisitions to tax havens.
Whatever the soothing words offered by Fortress and its partners, Morrisons’ workforce and suppliers should fear for their jobs and contracts, consumers should be worried about choice, and the Government about a potential loss of tax income.
This is a transaction which at the very least needs scrutiny by the Commons business committee and the Competition & Markets Authority. It is a deal that is bad for Britain.
Shoppers ‘could pay the price’: Morrisons customers and suppliers could lose out after board backs fresh takeover bid from US investors
Lucy White, City Correspondent for the Daily Mail
Morrisons customers, staff and suppliers could lose out after the supermarket’s board backed a fresh takeover bid from a group of controversial investors, critics fear.
The chain revealed at the weekend that it had received a second takeover bid, worth £6.3billion, from a consortium led by US private equity firm Fortress – and would recommend the offer to its shareholders.
The bidders have promised to be ‘good stewards’ of the popular British grocery business, vowing to keep the headquarters in Bradford and not to make any ‘material’ sales of its property.
The chain revealed at the weekend that it had received a second takeover bid, worth £6.3billion, from a consortium led by US private equity firm Fortress – and would recommend the offer to its shareholders. A Morrisons store is seen above
But critics have questioned their intentions. Lord Sikka, a Labour peer and professor at Essex Business School, said: ‘My concern is whether this is a good deal for consumers, employees and businesses in the supply chain. Private equity has a habit of only paying minimum wage and not offering any security to the supply chain.
‘Various firms have made promises in the past to protect British jobs, but we need practical steps. And for that, you need to involve employees in the sale process.’
Morrisons bosses are set for bumper pay-outs under the Fortress offer. Chief executive David Potts would earn £19million for the 3million shares he owns outright and 4.6million that he could receive under various company reward schemes.
Operating chief Trevor Strain could make £11million and finance boss Michael Gleeson more than £3million.
The new Fortress-led offer will also include Canadian pensions giant CPPIB and KREI, a division of Koch Industries, owned by billionaire Donald Trump ally Charles Koch.
Fortress was founded in 1998 by partners including Wesley Edens, a majority shareholder in Aston Villa football club.
The fears for Morrisons come amid a wave of takeover attempts for British businesses by private equity firms
Morrisons’ shareholders will now vote on the deal. It must be passed by more than 50 per cent of those who vote and together they must hold 75 per cent of the company.
But top-ten shareholder, fund manager JO Hambro, said last week that bidders should be offering 270p per share for Morrisons – well above Fortress’s bid of 254p.
Private equity firms buy companies and look to sell them on around five years later for a profit. But they are often criticised for their brutal tactics and short-term outlook.
Critics drew attention to the track record of Morrisons’ new bidders. Charles Koch and his late brother David sparked anger in 2010 after pumping more than £700,000 into a campaign to repeal California’s climate change laws. The family’s foundation, which invests in property, has also funded pushes to evict tenants from their homes during the pandemic.
Meanwhile, CPPIB refused to back an agreement between shopping centre business Intu and its lenders to give it breathing room on its debt last year.
The fears for Morrisons come amid a wave of takeover attempts for British businesses by private equity firms.
Buyout companies unveiled 365 offers for companies between January and June – the most since records began in 1984 – leading to accusations of ‘pandemic plundering’ as they rush to snap up businesses on the cheap.
Last month, Morrisons rejected US giant Clayton Dubilier and Rice’s £5.5billion bid.
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