A planned £6.3bn takeover of Morrisons could be at risk after the supermarket’s largest shareholder said they were likely to turn it down.
Silchester Asset Management, which owns a 15% stake in the UK’s fourth largest supermarket, said it was “not inclined to support” the 252p a share bid from a consortium led by US investment group Fortress backed by the billionaire Koch family.
A lack of support from such as significant shareholder could make it difficult for the deal to gain the required approval from investors representing 75% of Morrisons’ shares at a vote on 16 August.
The fund manager said Morrisons’ board, which recommended the Fortress offer earlier this month, should “allow more time to respond to other parties who might offer better value to Morrison’s public shareholders”.
It added that there was “little in the recommended offer that could not be achieved by Morrison as a listed company”.
The criticisms come after Legal & General Investment Management, the UK’s largest asset manager, warned that private equity firms should not be allowed to acquire Morrisons for the “wrong reasons”.
LGIM suggested it would be wrong for potential buyers to profit from Morrisons’ possibly undervalued property portfolio or to load it up with debt, or cut its tax bill.
The £6.8bn buyout of Asda and the bids for Morrisons have prompted fears that buyout groups are taking advantage of a drop in value of supermarkets during the pandemic, when profits were hit by a rise in costs.
Morrisons shareholders are set to vote on the Fortress offer next month, a week after the deadline for rival bidder Clayton, Dubilier & Rice to put forward a potential better offer.
CD&R kicked off the bidding process with a 230p-a-share bid, which Morrisons’ board said was not sufficient before accepting the Fortress offer.
A third potential bidder, Apollo Global Management, has said it no longer plans to make its own bid for Morrisons but is in discussions about teaming up with Fortress.
Morrisons’ share price currently stands at 266p, suggesting that investors expect a higher bid to emerge from the process.