The chairman of Morrisons has said he expects the US private equity firm in line to buy the supermarket chain for £7.1bn to stick to its word and keep hold of the retailer’s assets rather than sell them off.
Andrew Higginson also played down concerns over the UK’s supply chain crisis, caused by the national shortage of HGV drivers across Britain. He said the supply crunch had been well publicised but was “slightly overblown”, adding that he expected no disruption to Christmas deliveries.
“[Christmas] tends to come every year, and everyone seems to be sort of ready for it,” Higginson said. “So no, I think it’ll be a good Christmas for people, I think people will want to treat themselves as they usually do. There are logistical issues at the moment, and I think those are sort of well publicised and slightly overblown, but you know the supply chains in the UK are incredibly efficient and I’m sure we’ll be able to deliver a great Christmas for customers as we go through.”
The supermarket boss – who will step down if shareholders approve the offer from Clayton, Dubilier & Rice (CD&R) later this month – said he trusted the new private equity owners to stick to their commitments to not sell off Morrisons’ store estate in order to raise cash.
“They’ve given a list of undertakings which, I think, under current legislation, is as good as we can get. And they’re very strong undertakings: to keep the business as it is, to keep the head office in Bradford,” Higginson said.
CD&R narrowly beat the Softbank-owned Fortress Investment Group with a 287p to 286p bid on Saturday. Shares in British supermarkets rose in early trading on the back of statements making clear Fortress was still interested in purchasing a British retailer.
Joshua Pack, a financier at Fortress, reiterated expressions of interest made by the firm over the weekend. “The UK remains a very attractive investment environment from many perspectives and we will continue to explore opportunities to help strong management teams grow their businesses and create long-term value,” he said.
Sainsbury’s, seen as the prime target for a private equity takeover, was up by as much as 5% at one point on Monday morning, making it the top riser on the FTSE 100, while shares in Tesco and Ocado were also up by more than 1%.
CD&R has been trying to address concerns raised by politicians and unions, who fear the wave of private equity takeovers will mean stripping British companies of their property holdings, loading them up with debt and lowering working standards.
“I think private equity gets a bit of a bad rap,” Higginson told BBC Radio 4’s Today programme.
“Obviously there are good and bad [private equity firms], like in any population. But by and large, private equity is focused on growth and trying to grow businesses, and that’s the way they make their returns: by improving the businesses and flipping them on, you know, a few years on.”
He pointed to CD&R’s ownership of B&M, which he said proved the private equity owner was interested in “growing the business and creating value” rather than trying to extract wealth through “some sort of financial engineering”.
CD&R netted an estimated profit of about £1bn after selling its remaining stake in the discount retailer in 2018, which was chaired by the CD&R adviser and former Tesco boss Sir Terry Leahy for five years after the takeover in 2012.
Leahy is expected to be appointed chair of Morrisons if shareholders approve the CD&R deal in a vote on 19 October.
“I would imagine having him on their roster would be a very sensible move,” Higginson said. “I mean obviously I know Terry very well from having worked with him for a number of years, and he’ll be a very good chairman for the business.”