Morrisons must not be sold for ‘wrong reasons’: Top City fund manager warns against loading supermaket with debt and selling off its property assets
Morrisons must not be sold to private equity for the ‘wrong reasons’, the City’s biggest fund manager warned yesterday.
Legal and General Investment Management – which has £1.3 trillion under management – warned against loading the supermarket with debt and selling off its property assets on the cheap.
Andrew Koch, senior fund manager at Legal & General Investment Management, said: ‘It is important that the company isn’t taken over for the wrong reasons.
Takeover fears: Legal and General – which has £1.3 trillion under management – warned against loading Morrisons with debt and selling off its property assets on the cheap
‘It should not come from buying its property portfolio too cheaply, levering the company up with debt, and potentially reducing the tax paid to the Exchequer.’
The comments are the strongest yet from any of Morrisons top investors and show that shareholders will not roll over easily.
Fears are mounting that a private equity takeover of Morrisons, led by chief executive David Potts, could result in heavy job cuts and the dismantling of one of the UK’s oldest grocers.
Legal & General’s intervention comes as the grocer’s board agreed over the weekend to a £6.3billion or 254p per share sale to a consortium of investors, led by New York-based private equity firm Fortress.
It followed the rejection of a rival 230p offer from rival buyout firm Clayton, Dubilier & Rice in June, while yesterday a third firm, Apollo, revealed it could bid for Morrisons as well.
Hopes of a bidding war sent the supermarket group’s shares soaring by 11.6 per cent yesterday.
Koch also said the bidding process for Morrisons had led to ‘more questions than answers’ so far.
He accused the supermarket’s board, led by chairman Andy Higginson, of disclosing ‘little information’ about the value of its assets, amid fears that these could be sold by a private equity buyer in a short-term bid to boost profits.
Koch added: ‘Given this is an agreed bid, it is likely that Fortress and their partners have had more information than others on this.
Investors need to have the detailed figures to be able to make a considered decision regarding the right future for the company and their shareholdings.’
Analysts said other potential bidders could be waiting in the wings as well, from rival private equity firm Lone Star to tech giant Amazon, which has an online delivery partnership with Morrisons.
Sainsbury’s is another potential bidder being touted by analysts as the grocer looks to grow its market share.
Buyout firms have plundered British businesses during the pandemic as share prices remain depressed.
Breakdown firm the AA, portable power company Aggreko and infrastructure giant John Laing are among listed firms to have succumbed to private equity takeovers.