For much of the past half-century, Morrisons supermarket has been hailed as a bastion of responsible British capitalism. Under the leadership of the late Ken Morrison, the company prided itself on its conservative business model, characterised by low levels of debt and good relations with workers and suppliers. But in recent weeks Britain’s fourth-largest supermarket chain has been the subject of a bidding war between investors that have a rather different business ethos.
In June, private equity firm Clayton, Dubilier & Rice offered to buy Morrisons for £8.7bn, in a move that would take the company off the London Stock Exchange and into private hands. The bid was ultimately rejected, but on 3 July a £9.5bn offer from another private equity firm, Fortress Group, was accepted. The deal, which is still subject to shareholder approval, will result in an estimated £19.6m payoff for the company’s chief executive, David Potts. Another private equity giant, Apollo Global Management, has said it is considering lining up a rival counteroffer.
The scramble to purchase a UK supermarket chain in the middle of a global pandemic raises an obvious question: why are profit-hungry private equity funds so keen to sink their fangs into a sector that is notorious for its cut-throat competition and low profit margins?
