The Lemon Fool

Posted: **August 7th, 2021, 12:29 pm**

Arborbridge wrote:
Dod101 wrote:You should have paid attention Arb. Long ago I said that the supermarkets were a pretty hopeless investment! It is though quite remarkable that even at the new offer price your wife is still under water.

Just done my valuation for this week across my portfolio and it is comfortably at its highest ever valuation., Most should be in the same position I should imagine because there has been a very wide uplift in prices in these last few weeks.

Dod

<leg-pull mode>
But you said CSN was a pretty good investment.... and I'm 25% down on that And you said HSBC was too, and SSE - so good you sold it at one point. <end of>

Don't worry, I've been in the game since 1986 -I'm used to taking the rough with the smooth.
When HYPing came along, I quite naturally followed the usual guidelines, which includes diversity. The whole reason for that is based on the principle that it is imposssible to say which company or sector will do particularly well or badly - and naturally, I stuck to that.
Tesco was bought at a time when almost everyone on TMF agreed that it was a company which was pretty much a given for an investor and it later even had the backing of Warren Buffett. The same could be said for Sainsburys which I bought at an early stage. At that stage I doubt anyone would have said it was foolish to include them, any more than it would have looked foolish to include Lloyds.

Actually, I still own both companies and have no plans to sell. They haven't proved a great investment for the first ten years, but I can't predict the next ten years, and neither has yet triggered a valid reason for selling within the HYP framework.

HYP portfolios are designed to take the ups and downs and produce a moderately acceptable result: that's what it is doing. Trying to second guess what may happen isn't usually part of it.

PS my own HYP sold out of MRW a while back as it was over-exposed to retail. MrsArb's portfolio didn't simply because it was the only supermarket in the portfolio. It turns out, she has probably done better holding on and not selling compared with my main HYP.

Arb.

Thanks. Better not pick up on the others you mention here, but they are all worth some discussion on another thread.

Dod

Posted: **August 7th, 2021, 3:43 pm**

Bouleversee wrote:Does that mean that they know that CD&R (the first offeror) have no intention of making an increased offer before 9 August? If not, that recommendation (which is all it can be) seems like a dereliction of duty. The Board must be ultra keen to make the Fortress contingent the winners, possibly because they would keep their jobs if so. Maybe CD&R weren't so keen to have them. I'm still hoping that the latter will come up with an even better offer since I still won't be getting my money back at the revised Fortress offer price though I would be at the current market price. What does Mr Market know that we don't?

UK's Morrisons wants CD&R to have more time to consider counter offer

British supermarket Morrisons said on Friday it has asked the Takeover Panel to extend an August 9 deadline for suitor, U.S. private equity firm Clayton, Dubilier & Rice (CD&R), to consider a takeover offer for the group.

Earlier, Morrisons said it had agreed to an improved takeover offer worth 6.7 billion pounds ($9.3 billion) in cash from a consortium led by Fortress Investment Group.

Morrisons has now postponed an August 16 shareholder meeting to vote on that offer and set a new date of August 27.

https://www.reuters.com/article/morriso ... SFWN2PD0ZQ

Not that my YouInvest SIPP has told me yet that I have longer to vote; they still say that I have to vote "before 09/08/2021" (which was annoying enough, having to vote online a full week before the meeting date, when CD&R might possibly come up with another offer. I can't see why online voting has to be done so early). I just found this via a news search.

Posted: **August 7th, 2021, 5:23 pm**

EthicsGradient wrote:Not that my YouInvest SIPP has told me yet that I have longer to vote; they still say that I have to vote "before 09/08/2021" (which was annoying enough, having to vote online a full week before the meeting date, when CD&R might possibly come up with another offer. I can't see why online voting has to be done so early). I just found this via a news search.

Morrisons board have asked for an extension which suggests to me there is a very high likelihood that CD&R want to make another bid - and surely they would already have said 'we're out' if they didn't plan to bid again.

The share price being above Fortress' revised bid says that Mr Market thinks a higher offer is likely.

However, it feels like CD&R are messing around a bit, leaving it very late to make a revised offer, unlike Fortress who have been quicker to act.

Posted: **August 7th, 2021, 5:53 pm**

Gengulphus wrote:
Arborbridge wrote:It's a shame, but Mrs Arb will still be 20% down on her investment, even at yesterday's price.

I'm a bit puzzled as to how she's managed that, as the highest MRW price I've managed to find with the aid of a long-term FT chart (edit: going back to late 1991) is an intraday high of 321.02p on May 8th, 2007. Yesterday's closing price of 278.8p is only 13.2% down on that. It's conceivable that I've missed a higher possible purchase price, of course, but it would be interesting to know what it was, and when it happened.

And someone who bought at that intraday high has already received a total of 130.59p in dividends per share since their purchase (assuming I've added them up correctly), so if they sold at yesterday's closing price, they'll have received a total of 409.39p for each 321.02p they invested, an overall profit of 27.5%. Over about 14.25 years, that annualises to about 1.72% per year (*), so they're definitely only very unimpressively up - but they're equally definitely up, not down!

(*) The rate of return will be a bit higher, due to the dividend cash having been received after shorter periods than 14.25 years, but not enough higher to alter my remarks above.

Gengulphus

I'm so glad to have you around to trap these errors

When one writes on here it is deadly to try and post in a hurry, without spending a long time checking the allegation in depth. In this case it looks as though the spread sheet I took the numbers from (the simplest source to hand for a post) had at least one simple error - namely, hadn't reduced the cost of the investment to account for a sale in 2016.

Checking the broker account, the gain calculated from the average buying price is over 18% from when the stock was transferred in from another broker in 2011. Whether that's accurate or not, I'm not clear - transferring could produce an error of its own. According to my Analyst program, where all transactions are logged, the gain has been 11.8% since original purchase.

Whichever way it is, the news is that, happily, she will have benefitted from the investment made, plus the dividends on the way which have been considerable.

A supermarket: not the best investment, but not such a bad investment after all, Dod

Arb

Posted: **August 7th, 2021, 5:57 pm**

I'm sure I read somewhere, probably in The Times, that CD&R do want to make another offer but the revised Fortress offer has queered the pitch somewhat and they are now scrabbling around to organise the finance for what would now have be a higher offer than they had bargained for and their deadline has been extended to accommodate this. It remains to be seen whether they will manage to pull it off.

Posted: **August 7th, 2021, 6:05 pm**

EthicsGradient wrote:
Bouleversee wrote:Does that mean that they know that CD&R (the first offeror) have no intention of making an increased offer before 9 August? If not, that recommendation (which is all it can be) seems like a dereliction of duty. The Board must be ultra keen to make the Fortress contingent the winners, possibly because they would keep their jobs if so. Maybe CD&R weren't so keen to have them. I'm still hoping that the latter will come up with an even better offer since I still won't be getting my money back at the revised Fortress offer price though I would be at the current market price. What does Mr Market know that we don't?

UK's Morrisons wants CD&R to have more time to consider counter offer

British supermarket Morrisons said on Friday it has asked the Takeover Panel to extend an August 9 deadline for suitor, U.S. private equity firm Clayton, Dubilier & Rice (CD&R), to consider a takeover offer for the group.

Earlier, Morrisons said it had agreed to an improved takeover offer worth 6.7 billion pounds ($9.3 billion) in cash from a consortium led by Fortress Investment Group.

Morrisons has now postponed an August 16 shareholder meeting to vote on that offer and set a new date of August 27.

Https://www.reuters.com/article/morriso ... SFWN2PD0ZQ

Not that my YouInvest SIPP has told me yet that I have longer to vote; they still say that I have to vote "before 09/08/2021" (which was annoying enough, having to vote online a full week before the meeting date, when CD&R might possibly come up with another offer. I can't see why online voting has to be done so early). I just found this via a news search.

ii have still not amended the original offer from Fortress and the date of the meeting on the corporate action notice on my account.

Posted: **August 8th, 2021, 9:34 am**

Arborbridge wrote:I'm so glad to have you around to trap these errors

Glad to have helped... :-J

The reason I spotted this error was mainly that about a month ago, I commented on my experience with Morrisons in my HYP in a HYP Practical post about the first recommended offer, in viewtopic.php?f=15&t=30157. In the course of writing it, I'd been reminded that my initial purchases in latish 2013, which had been at prices around 280p, had turned out to be quite unfortunately-timed: the price fell quite rapidly over the next year or so, then more slowly over the year or so after that, and then the dividend was cut in 2016. So if I'd made those purchases a year or two later, I'd have got in at a considerably lower price (the purchases I did make in 2014 were at prices around 180p) and only lost out on a year or two of 13p-ish dividends. And if I'd made them a year or two earlier, I'd have got them at about the same price and have a year or two's extra dividends under my belt... But I'd also noticed that even the 2013 purchases were slightly up on the basis of the first 254p offer plus dividends earned minus the 280p-ish purchase price. (The 2014 purchases were of course quite a bit better, but I'd lumped them together with the 2013 purchases in the linked post because they were the shares I'd held long-term.)

So I'd noticed at that time that I was slightly up even on some rather unfortunately-timed purchases, and so your post made me wonder how they could have been considerably more unfortunately-timed - so I took a look at a long-term chart and failed to find a way. I probably wouldn't ever have noticed the problem if I hadn't held the shares myself, or if I had but hadn't taken a close look at my own record with them recently...

The point of all that: don't start to rely on me trapping such errors! ;-)

Gengulphus

Posted: **August 8th, 2021, 6:12 pm**

Arborbridge wrote:A supermarket: not the best investment, but not such a bad investment after all,
Arb

And, looking to the future, I seem to remember that supermarkets were among the best and most reliable investments in times of inflation.

Posted: **August 8th, 2021, 6:47 pm**

stockton wrote:
Arborbridge wrote:A supermarket: not the best investment, but not such a bad investment after all,
Arb

And, looking to the future, I seem to remember that supermarkets were among the best and most reliable investments in times of inflation.

That sounds a bit of a muddle although I think I vaguely understand what you are trying to say, That 'supermarkets have a sort of built in protection against inflation.'

Dod

Posted: **August 8th, 2021, 7:50 pm**

I'm just hoping that the 3 I hold will, one way or another, protect me against the rise in food etc. prices which has been happening for some time, albeit sometimes disguised by reduced package contents, since we all have to eat. However, since their purchasing costs are increasing, I'm not totally confident that they will.

Posted: **August 9th, 2021, 12:19 pm**

Another update on Interactive Investor
==============================================================================================================================
Wm Morrison Supermarkets PLC - Bradford-based grocer - Deadline for Clayton, Dubilier & Rice LLC to make a firm takeover offer or walk away is extended to August 20 from Tuesday. That's after CD&R asked for more time to evaluate its options. Morrisons adjourned the shareholder meetings to approve the rival offer from a consortium led by Fortress Investment Group LLC to August 27. Morrisons rejected CD&R's 230 pence per share potential offer on July 20, before accepting a 254p-per-share offer from Fortress. That was later increased to 272p per share, valuing Morrisons at GBP6.7 billion.
=============================================================================================================================
If you have an account there artlcle is here
https://www.ii.co.uk/secure/my-news-fee ... 8751241200

Posted: **August 16th, 2021, 4:56 pm**

Rival preparing to better Fortress bid for Morrisons

Clayton Dubilier & Rice, the American private equity firm, is preparing to bid for Morrisons this week as the company will look to usurp Fortress.
...
The Times reported that Clayton Dubilier & Rice will need to offer at least 275p, while some with better knowledge of the deal have suggested that 280p would be a more appropriate offer.

https://ukinvestormagazine.co.uk/rival- ... morrisons/

Morrisons bid rival to make pledge on property sale

US buyout firm Clayton, Dubilier & Rice will promise not to sell off large chunks of Morrisons' property empire when it tables an improved cash offer for the supermarket later this week.

Morrisons' board is currently recommending shareholders accept a bid from another consortium led by US-based and Japanese-owned Fortress Group.

Morrisons, the UK's number four grocer, owns 86% of its store freeholds.

Supermarkets like Tesco and Sainsbury's own just over 50% of theirs.

The Fortress consortium includes the property arm of the biggest private company in the US, Koch Industries, which led many to suspect that large-scale property sales would be part of the plan.

However, in its offer document, Fortress said it "does not anticipate engaging in any material store sale and leaseback transactions".

A person close to the deal said Clayton, Dubilier & Rice (CD&R) could be expected to make "similar commitments" if and when it improves on the latest Fortress bid of £6.7bn before a deadline this Friday.

Exactly what "material" means to either bidder is unclear. As one person close to the CD&R bid told the BBC: "Morrisons owns 86% of its stores, Tesco around 55%. If Morrisons moved to 75%, that would still mean it owned the vast majority."

https://www.bbc.co.uk/news/business-58235186

Posted: **August 19th, 2021, 10:29 pm**

CD&R up their bid to 285p

https://www.ft.com/content/3c55630f-9a8 ... bb11c72983

I think my average buy price is ~205p, I’ll be sad to see Morrison’s go into private hands but I’m going to make good out of which ever offer wins

Posted: **August 19th, 2021, 11:27 pm**

I see the Board has recommended this one, too. Is this the end of the story or will Fortress come back with a bigger offer. Just as well the shareholders have the last word. I would get my money back plus a small profit with this one so it was worth waiting for; a 60% premium to the first one.

Posted: **August 20th, 2021, 8:08 am**

Just been offered 291.6p a share

What is the consensus?

Is this the best it is going to be?

Or do I wait?

This price is slightly below what I paid 8 years ago for them in my isa.

Paultry

Posted: **August 20th, 2021, 8:17 am**

Bouleversee wrote:I see the Board has recommended this one, too. Is this the end of the story or will Fortress come back with a bigger offer. Just as well the shareholders have the last word. I would get my money back plus a small profit with this one so it was worth waiting for; a 60% premium to the first one.

No one should now pay any attention to what the Board recommends. They just take the first bid going (as long, I suspect, as their own jobs are guaranteed) They have really made fools of themselves on this one.

All the talk, even with the latest bid, of 'breaking even', 'a small profit' or even 'Still a bit less than I paid' confirms that they have not been an out and out great investment.

Dod

Posted: **August 20th, 2021, 8:26 am**

Dod101 wrote:No one should now pay any attention to what the Board recommends. They just take the first bid going (as long, I suspect, as their own jobs are guaranteed) They have really made fools of themselves on this one.
All the talk, even with the latest bid, of 'breaking even', 'a small profit' or even 'Still a bit less than I paid' confirms that they have not been an out and out great investment.
Dod

Isn't that what happens in a bidding war, or do you think they should have a crystal ball?
btw not all of us are unhappy, my average buying price over the last 7 years is £1.81

Posted: **August 20th, 2021, 8:37 am**

another update from Interactive Investor

(Alliance News) - Softbank-backed investment manager Fortress hasn't abandoned yet its effort ort to buy Wm Morrison Supermarkets, despite the UK grocer late Thursday agreeing to a new GBP7 billion offer from rival bidder Clayton, Dubilier & Rice.

Fortress on Friday asked Morrisons shareholders to take no action on the new CD&R bid, saying it is "considering its options" with respect to the all-cash offer it made at the start of July and increased at the start of August. It said it will make a further announcement "in due course".

The new CD&R offer has been unanimously accepted by the board of the grocer, and directors have said shareholders should vote in favour of the takeover at a meeting due in early October. This means Morrisons has withdrawn its recommendation for investors to accept a previous GBP6.7 billion takeover deal from a consortium led by Fortress.

Last week, CD&R was given an extended deadline until this afternoon by takeover regulators to say whether it wants to make a new offer for Morrisons, or to walk away.

CD&R had originally been turned down by the Morrisons board over a potential GBP5.5 billion bid. In June, the board said the offer "significantly undervalued Morrisons and its future prospects". Since then CD&R had been pondering whether it should increase its bid for the supermarket chain.

Morrisons shares were up 4.6% at 292.08 pence early Friday.

Link if you have an account login
https://www.ii.co.uk/secure/my-news-fee ... 8149246000

Posted: **August 20th, 2021, 8:44 am**

pje16 wrote:
Dod101 wrote:No one should now pay any attention to what the Board recommends. They just take the first bid going (as long, I suspect, as their own jobs are guaranteed) They have really made fools of themselves on this one.
All the talk, even with the latest bid, of 'breaking even', 'a small profit' or even 'Still a bit less than I paid' confirms that they have not been an out and out great investment.
Dod

Isn't that what happens in a bidding war, or do you think they should have a crystal ball?
btw not all of us are unhappy, my average buying price over the last 7 years is £1.81

That is not what always happens in a bidding war. The directors have a fiduciary duty to look after the interests of shareholders and that does not mean recommending the first offer (and each subsequent one) that comes along. What on earth is the meaning of the recommendation if they do that? A recommendation is supposed to mean 'Look this is about as good as it is going to get' not 'Look this is well over last night's closing price and besides the bidder has guaranteed our jobs'.

If you look at the history of bidding wars often enough the Directors have held out saying things like 'This bid substantially undervalues the business bearing in mind that unlike some supermarkets we own 85% of our real estate. This has the benefit of............and in itself was valued at £........ last year, representing 70/80/90% of the value of the entire company based on the bid price offered' .

The Directors presumably have advisers behind the scenes to make a good case for extracting the best price.

I have not held any supermarket shares since I sold Sainsbury back about 2015. Good for you to make a profit. It all depends on timing. I sold on the basis that they each are just gauging market share from the other and there is not much profit in that.

Dod

Posted: **August 20th, 2021, 8:55 am**

OK you make some good points - thanks
but every bidding war is different
so no-one can tell in advance what the outcome is likely to be
Sorry I wasn't trying to be sarcastic re my crystal ball comment
If they existed we would all be rich :lol:

The Lemon Fool

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