Morrisons suitor Fortress could take its time to respond to CD&R bid

Fortress is likely to take some time to get its files in order after CD&R bid 285 pence for the UK-based grocer on 20 August, one of the sources said. A revised offer may not be forthcoming at all, another source said.

CD&R's bid pipped Fortress's offer of 272 pence per share, leading Morrisons' board to switch its recommendation to CD&R's offer. Fortress has urged Morrisons' shareholders to take no action while it mulls its next steps.

Fortress has until a scheme meeting is held for target shareholders to vote on the deal to revise its offer. Fortress's current offer remains live, with target shareholders scheduled to vote on the scheme of arrangement on 5 October. The vote for CD&R's scheme is also anticipated to be in or around the week commencing 4 October.

The bidding war between Fortress and CD&R for Morrisons shows that valuations of grocery businesses have shifted, a sector adviser said. Mergermarket previously reported that Fortress's initial offer of 254 pence per share was near the limit that could be paid for a low-margin – albeit high-cashflow – grocer, but the adviser said bidders' ideas of fair value may reflect more than Morrisons' legacy business.

Metrics such as footfall and turnover no longer tell the whole story, the adviser said. Instead, as shoppers stay home, investors should look to grocery-delivery business Ocado, which bills itself as a tech firm, he said. It helps that Morrisons' partnership with Amazon has let it build an established base of delivery customers, he said.

Shares in Morrisons are currently trading above CD&R's recommended offer at 289.99p, giving it a market capitalisation of GBP 6.99bn.

Fortress and CD&R declined to comment. Morrisons did not respond for comment.

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