Morrisons (MRW)

[Arborbridge]

I sold out at a loss a while back, but Morrisons was retained in my wife's HYP. As often happens with these take overs, a trumpeting of what a great boon it is to investors and how lucky we should feel is often accompanied by a feeling that it's nothing of the sort.
The WyfHyp will little more than breakeven and will have the headache of choosing something else. Morrisons is a good supermarket and these opportunistic predators wouldn't be interested if it weren't: on that basis long term shareholders like me would rather hold on, buy more, and see the value out over the years.

One usually feels swindled and it seems to be fact of life in the stock market. I've been robbed quite a few times now - PizzaExpress, Amlin, Arriva, UBM and many others come to mind, where temporary difficulties have been the cause of daylight robbery. Seldom have I made a killing from a takeover however much the new owners try to fool us into thinking they are being "generous": they aren't.

Arb.

[Arborbridge]

Morrisons has accepted a £6.3bn takeover bid from a new group of funds led by affiliates of Softbank-backed Fortress, the firm announced on Saturday.

Morrisons shareholders will receive 254 pence a share, comprising 252 pence in cash and a 2 pence cash dividend

https://www.cityam.com/morrisons-accept ... -fortress/

Undoubtedly the company will be saddled with the debt used to buy it. And the new management will maximise their take from the estate. Leaving the employees and the local area to pick up the bill. It has happened many times the last few years. The state of many high streets demonstrates the cost to society. A sad day.

Yes, I already know that's not a hard line capitalist view point, it makes me a pinko liberal bleeding heart do gooder etc.....

RVF

I absolutely share your feelings. This type of takeover is even aided by the legal requirements on directors to sell up in the"interessts" of shareholders. This is a tough law tantamount to being a self-destruct formula for the company stakeholders and the local people. Getting companies to load themselves up with debt in order that new owner should buy out is a scandalous act.

Arb.

[Bouleversee]

I don't understand why the Board has accepted this offer at this stage instead of encouraging a bidding war. Why aren't the institutions kicking up a fuss? Shareholders should vote against it and the govt. should stop these opportunistic takeovers by foreign companies though I remain to be convinced that their intervention over Asda achieved a better outcome.

[scrumpyjack]

I don't understand why the Board has accepted this offer at this stage instead of encouraging a bidding war. Why aren't the institutions kicking up a fuss? Shareholders should vote against it and the govt. should stop these opportunistic takeovers by foreign companies though I remain to be convinced that their intervention over Asda achieved a better outcome.

The board 'accepting' it simply means they have confirmed the company is for sale and recommend that this price is a good price. But they don't own the shares so can't validly 'accept' the bid. Other potential bidders now know the price to beat and that the company is 'in play' (ghastly term!), so they will bid if they want to and the bidding war can start.

[Dod101]

That should put it out of its misery. Of course the only reason I can see for it attracting a bid is because of its real estate. The bidder will now extract value by a sale and leaseback, pay itself a nice big dividend and move on. Supermarkets as trading businesses are not much good as investments which is why I hold none. OTOH if you like dividends above all else why not hold them?

The Board has not accepted the offer,;they have merely recommended it, which is in any case all they can do. As scrumpjack says they cannot accept the offer; that is up to the individual shareholders.

Dod

[Bouleversee]

I don't understand why the Board has accepted this offer at this stage instead of encouraging a bidding war. Why aren't the institutions kicking up a fuss? Shareholders should vote against it and the govt. should stop these opportunistic takeovers by foreign companies though I remain to be convinced that their intervention over Asda achieved a better outcome.

The board 'accepting' it simply means they have confirmed the company is for sale and recommend that this price is a good price. But they don't own the shares so can't validly 'accept' the bid. Other potential bidders now know the price to beat and that the company is 'in play' (ghastly term!), so they will bid if they want to and the bidding war can start.

Obviously, it is down to the shareholders at the meeting at the end of the day so why say "accepted" rather than "recommended"? What I don't understand, to be precise then, is why they have recommended the offer which might be off-putting to other potential bidders waiting in the wings. However, I live in hope that such a low price might bring a few more interested parties out of the woodwork or that the sale will not go ahead at all.

Softbank took over Arm Holdings a few years ago to my annoyance as it was one of my best holdings and have now sold it on to a US company at a large profit. We need more chip makers in this country. And I seem to remember Fortress making allegations about a company which have recently been proved wrong but I could be wrong about that.

[Dod101]

I don't understand why the Board has accepted this offer at this stage instead of encouraging a bidding war. Why aren't the institutions kicking up a fuss? Shareholders should vote against it and the govt. should stop these opportunistic takeovers by foreign companies though I remain to be convinced that their intervention over Asda achieved a better outcome.

The board 'accepting' it simply means they have confirmed the company is for sale and recommend that this price is a good price. But they don't own the shares so can't validly 'accept' the bid. Other potential bidders now know the price to beat and that the company is 'in play' (ghastly term!), so they will bid if they want to and the bidding war can start.

Obviously, it is down to the shareholders at the meeting at the end of the day so why say "accepted" rather than "recommended"? What I don't understand, to be precise then, is why they have recommended the offer which might be off-putting to other potential bidders waiting in the wings. However, I live in hope that such a low price might bring a few more interested parties out of the woodwork or that the sale will not go ahead at all.

Softbank took over Arm Holdings a few years ago to my annoyance as it was one of my best holdings and have now sold it on to a US company at a large profit. We need more chip makers in this country. And I seem to remember Fortress making allegations about a company which have recently been proved wrong but I could be wrong about that.

If the word 'accepted' has been used it is on the secondary site and of course by Fluke, possibly without thinking too much about it. As I think Gengulphus said, you really ought to go to the Morrison site. In the official statement they use the expression 'recommended offer'. I have never understood why people refer to secondary sites like cityam except as a news channel. If they want the information in all its glory then refer to the official announcement. I doubt very much that a recommendation from the Directors would put off any potential bidder, but it would seem that they have come to the conclusion that the new bid is as good as it is going to get. Who knows?

Dod

[Dod101]

Morrisons has accepted a £6.3bn takeover bid from a new group of funds led by affiliates of Softbank-backed Fortress, the firm announced on Saturday.

Morrisons shareholders will receive 254 pence a share, comprising 252 pence in cash and a 2 pence cash dividend

https://www.cityam.com/morrisons-accept ... -fortress/

Undoubtedly the company will be saddled with the debt used to buy it. And the new management will maximise their take from the estate. Leaving the employees and the local area to pick up the bill. It has happened many times the last few years. The state of many high streets demonstrates the cost to society. A sad day.

Yes, I already know that's not a hard line capitalist view point, it makes me a pinko liberal bleeding heart do gooder etc.....

RVF

I think we should blame the current Directors. I am not sure that they have a fiduciary duty to try to stop a company from being bought; in fact given the right price it may be that they have a fiduciary duty to recommend it but surely they have a duty to do their best by the shareholders and that is do all in their power to get the price of the shares at a level to at least equal NAV which I imagine they have failed to do in this case otherwise there would be no bid. They could have done a sale and leaseback themselves for instance, but otherwise we just have to accept that short of a controlling shareholder, there is nothing to stop a takeover and its consequences.

Dod

[scrumpyjack]

I think we should blame the current Directors. I am not sure that they have a fiduciary duty to try to stop a company from being bought; in fact given the right price it may be that they have a fiduciary duty to recommend it but surely they have a duty to do their best by the shareholders and that is do all in their power to get the price of the shares at a level to at least equal NAV which I imagine they have failed to do in this case otherwise there would be no bid. They could have done a sale and leaseback themselves for instance, but otherwise we just have to accept that short of a controlling shareholder, there is nothing to stop a takeover and its consequences.

Dod

Net asset value for Morrisons shares is 175p so the bid is well north of that. The problem for supermarkets at present is that they are very lowly rated by investors. There is relentless competition, especially from Aldi and Lidl, and overall sales are pretty stagnant. There is also a problem for the very large supermarkets that have superstores built to sell lots of non food products, but that market is being taken by the likes of Amazon.

But with the ludicrously low interest rates we have now, bidders must reckon they can borrow and gear up, as the base level of profit for supermarkets is fairly reliable and so can support much higher gearing, which then raise the value of the remaining equity.

[Bouleversee]

The board 'accepting' it simply means they have confirmed the company is for sale and recommend that this price is a good price. But they don't own the shares so can't validly 'accept' the bid. Other potential bidders now know the price to beat and that the company is 'in play' (ghastly term!), so they will bid if they want to and the bidding war can start.

Obviously, it is down to the shareholders at the meeting at the end of the day so why say "accepted" rather than "recommended"? What I don't understand, to be precise then, is why they have recommended the offer which might be off-putting to other potential bidders waiting in the wings. However, I live in hope that such a low price might bring a few more interested parties out of the woodwork or that the sale will not go ahead at all.

Softbank took over Arm Holdings a few years ago to my annoyance as it was one of my best holdings and have now sold it on to a US company at a large profit. We need more chip makers in this country. And I seem to remember Fortress making allegations about a company which have recently been proved wrong but I could be wrong about that.

If the word 'accepted' has been used it is on the secondary site and of course by Fluke, possibly without thinking too much about it. As I think Gengulphus said, you really ought to go to the Morrison site. In the official statement they use the expression 'recommended offer'. I have never understood why people refer to secondary sites like cityam except as a news channel. If they want the information in all its glory then refer to the official announcement. I doubt very much that a recommendation from the Directors would put off any potential bidder, but it would seem that they have come to the conclusion that the new bid is as good as it is going to get. Who knows?

Dod

I think you are splitting hairs, Dod. City AM and the Today programme and all the subsequent news announcements on BBC said the offer had been accepted by the Board which does not necessarily mean that it will be accepted by all major or minor shareholders and this is what the company announcement says: "The boards of directors of Wm Morrison Supermarkets PLC (“Morrisons”) and Oppidum Bidco Limited (“Bidco”) are pleased to announce that they have reached agreement on the terms of a recommended all cash offer by Bidco for the entire issued, and to be issued, share capital of Morrisons (the “Offer”)". Surely this means so far as the Board is concerned, it has accepted the offer and recommends that other shareholders do likewise. I stand by my query as to why, but of course they know much more than we do about the state of the company and of course it will free up a lot of cash for them on shares which have probably been issued under LTIPs etc. and may not have cost them anything or were acquired at a discount (I haven't checked). One would need to be very strong-minded to resist a reasonable, albeit not optimum, offer under those circumstances which is why so many such deals go through and why rewards to directors and senior staff should come under greater scrutiny.

The City AM announcement contains far more background information than the Morrison website so I can't agree with you there either.

[Dod101]

Obviously, it is down to the shareholders at the meeting at the end of the day so why say "accepted" rather than "recommended"? What I don't understand, to be precise then, is why they have recommended the offer which might be off-putting to other potential bidders waiting in the wings. However, I live in hope that such a low price might bring a few more interested parties out of the woodwork or that the sale will not go ahead at all.

Softbank took over Arm Holdings a few years ago to my annoyance as it was one of my best holdings and have now sold it on to a US company at a large profit. We need more chip makers in this country. And I seem to remember Fortress making allegations about a company which have recently been proved wrong but I could be wrong about that.

If the word 'accepted' has been used it is on the secondary site and of course by Fluke, possibly without thinking too much about it. As I think Gengulphus said, you really ought to go to the Morrison site. In the official statement they use the expression 'recommended offer'. I have never understood why people refer to secondary sites like cityam except as a news channel. If they want the information in all its glory then refer to the official announcement. I doubt very much that a recommendation from the Directors would put off any potential bidder, but it would seem that they have come to the conclusion that the new bid is as good as it is going to get. Who knows?

Dod

I think you are splitting hairs, Dod. City AM and the Today programme and all the subsequent news announcements on BBC said the offer had been accepted by the Board which does not necessarily mean that it will be accepted by all major or minor shareholders and this is what the company announcement says: "The boards of directors of Wm Morrison Supermarkets PLC (“Morrisons”) and Oppidum Bidco Limited (“Bidco”) are pleased to announce that they have reached agreement on the terms of a recommended all cash offer by Bidco for the entire issued, and to be issued, share capital of Morrisons (the “Offer”)". Surely this means so far as the Board is concerned, it has accepted the offer and recommends that other shareholders do likewise. I stand by my query as to why, but of course they know much more than we do about the state of the company and of course it will free up a lot of cash for them on shares which have probably been issued under LTIPs etc. and may not have cost them anything or were acquired at a discount (I haven't checked). One would need to be very strong-minded to resist a reasonable, albeit not optimum, offer under those circumstances which is why so many such deals go through and why rewards to directors and senior staff should come under greater scrutiny.

The City AM announcement contains far more background information than the Morrison website so I can't agree with you there either.

Well I comment as a disinterested non shareholder but the announcement you have quoted from the Board refers to a recommended offer and nowhere do I see that it says 'accepted', not even, as these announcements often do, for the shares held by the Directors.

RVF has commented that the UK retail sector is uninvestable or words to that effect. I happen to agree with him which is why I do not hold any supermarkets or other retailer. I sold Sainsbury in January 2014 at £3.71. I do not know if there has been any corporate action since then but today they are quoted at £2.72. I did a note to myself then saying that supermarkets were a hopeless investment and have kept away from them ever since.

Dod

[Arborbridge]

That should put it out of its misery. Of course the only reason I can see for it attracting a bid is because of its real estate. The bidder will now extract value by a sale and leaseback, pay itself a nice big dividend and move on. Supermarkets as trading businesses are not much good as investments which is why I hold none. OTOH if you like dividends above all else why not hold them?

The Board has not accepted the offer,;they have merely recommended it, which is in any case all they can do. As scrumpjack says they cannot accept the offer; that is up to the individual shareholders.

Dod

The bidder will now extract value by a sale and leaseback,

According to the BBC, they have agree not to do this - though I don't see how anyone can prevent them after a few years. It's a terrible disease, this constant desire to sell off the family silver which honest workers and management have been striving for years to build up. It's also damn stupid unless one if a fly-by-might asset stripper. The companies doing this do not have a ounce of conscience or compassion about the wreckage they leave behind: I'd gaol the lot of 'em!

[dealtn]

The companies doing this do not have a ounce of conscience or compassion about the wreckage they leave behind: I'd gaol the lot of 'em!

I'm pretty sure that's not true, but even then there is a strong argument to say conscience or compassion isn't the important motivator for an owner or predator.

There appears to be quite a lot of comment about MRW being undervalued, and the terms of the bid not being acceptable. Directing that ire at the potential purchaser is odd. Of all the parties concerned they are the furthest from being one of the guilty parties that have contributed to the "large undervalaution" of MRW over the past days, weeks, months and years. Where is the ire directed at all the past sellers of shares at this undervaluation, and the non-buyers at the undervalued share price over those time frames?

If it was obvious, a priori, the share price was too low why weren't investors buying? It's all well bemoaning the price, but if investors weren't buying, or focussing on previous purchase prices as a justification for believing the current bid price is too low then the problems of price anchoring, and not buying more reflect on the judgements of the current holders, not the potential bidders I'm afraid.

[Arborbridge]

The companies doing this do not have a ounce of conscience or compassion about the wreckage they leave behind: I'd gaol the lot of 'em!

I'm pretty sure that's not true, but even then there is a strong argument to say conscience or compassion isn't the important motivator for an owner or predator.

There appears to be quite a lot of comment about MRW being undervalued, and the terms of the bid not being acceptable. Directing that ire at the potential purchaser is odd. Of all the parties concerned they are the furthest from being one of the guilty parties that have contributed to the "large undervalaution" of MRW over the past days, weeks, months and years. Where is the ire directed at all the past sellers of shares at this undervaluation, and the non-buyers at the undervalued share price over those time frames?

If it was obvious, a priori, the share price was too low why weren't investors buying? It's all well bemoaning the price, but if investors weren't buying, or focussing on previous purchase prices as a justification for believing the current bid price is too low then the problems of price anchoring, and not buying more reflect on the judgements of the current holders, not the potential bidders I'm afraid.

I'm bemoaning not so much the individuals as the extreme form of capitalist ethos that allows such things to happen. It allows a great deal of "unfairness" to develop in society such that only might is right without any regards for the good of society. Unfettered capitalism without tight regulation is a unpleasant and undesirable fact.

Arb.

[Dod101]

I'm bemoaning not so much the individuals as the extreme form of capitalist ethos that allows such things to happen. It allows a great deal of "unfairness" to develop in society such that only might is right without any regards for the good of society. Unfettered capitalism without tight regulation is a unpleasant and undesirable fact.

Arb.

What is it that you are actually bemoaning? That the price is not high enough, or that you would prefer to hold a low performing business or the loss of the dividends? We cannot regulate against this sort of thing or you will have an economy directed like the attempts by politicians such as Harold Wilson and we know that that simply does not work.

Dod

[Bouleversee]

The companies doing this do not have a ounce of conscience or compassion about the wreckage they leave behind: I'd gaol the lot of 'em!

I'm pretty sure that's not true, but even then there is a strong argument to say conscience or compassion isn't the important motivator for an owner or predator.

There appears to be quite a lot of comment about MRW being undervalued, and the terms of the bid not being acceptable. Directing that ire at the potential purchaser is odd. Of all the parties concerned they are the furthest from being one of the guilty parties that have contributed to the "large undervalaution" of MRW over the past days, weeks, months and years. Where is the ire directed at all the past sellers of shares at this undervaluation, and the non-buyers at the undervalued share price over those time frames?

If it was obvious, a priori, the share price was too low why weren't investors buying? It's all well bemoaning the price, but if investors weren't buying, or focussing on previous purchase prices as a justification for believing the current bid price is too low then the problems of price anchoring, and not buying more reflect on the judgements of the current holders, not the potential bidders I'm afraid.

I'm not directing my ire at any company trying to take Morrison over at a low price. I am angry with the Board for buckling so quickly and not doing enough to confound the day traders and algorithms which manipulate the s.p. to such a low level. If the company were not worth more, nobody would want to take thrm over.

[Fluke]

If the word 'accepted' has been used it is on the secondary site and of course by Fluke, possibly without thinking too much about it. As I think Gengulphus said, you really ought to go to the Morrison site. In the official statement they use the expression 'recommended offer'. I have never understood why people refer to secondary sites like cityam except as a news channel. If they want the information in all its glory then refer to the official announcement. I doubt very much that a recommendation from the Directors would put off any potential bidder, but it would seem that they have come to the conclusion that the new bid is as good as it is going to get. Who knows?

Dod

On this small off-shoot of the conversation regarding source of information, on hearing the news yesterday morning on the BBC News I went to the Morrisons corporate website looking for the announcement but couldn't find it. Gengulphus later posted the slightly complicated route to the notice. I took the path of least resistance and went to google and found the cityam notice which was good enough for the purpose and had some useful background analysis too. On every news bulletin yesterday the top story was the Morrisons story and that the offer had been accepted.

I hold Morrisons along with Tesco and Sainsbury in my HYP and the offer gives me my initial investment back with a bit of interest, so with the dividends over the years it did it's job, but not sorry to see the back of one of my many laggards, just wish it was one with a bigger stake.

[Bouleversee]

Front page headline in Sunday Times Business today: "Rivals weigh counter-bids as Morrisons accepts £6.3bn deal". Subheading: "Takeover trio stuns City by snatching fourth-biggest grocer - raising hopes of bidding war for Yorkshire chain."

[dealtn]

I am angry with the Board for buckling so quickly and not doing enough to confound the day traders and algorithms which manipulate the s.p. to such a low level. If the company were not worth more, nobody would want to take thrm over.

The price hasn't been at these levels for 2 1/2 years. If you think "day traders and algorithms" are able to "manipulate" a share price for that length of time, and to that degree, I don't think there is much I can say to convince you otherwise.

[BT63]

I am angry with the Board for buckling so quickly and not doing enough to confound the day traders and algorithms which manipulate the s.p. to such a low level. If the company were not worth more, nobody would want to take thrm over.

The price hasn't been at these levels for 2 1/2 years. If you think "day traders and algorithms" are able to "manipulate" a share price for that length of time, and to that degree, I don't think there is much I can say to convince you otherwise.

A takeover often happens because a company is relatively too cheap. Often it is too cheap because market fashions caused money to flow to other companies or asset classes.
Morrisons are a value style investment and value investing has been deeply out of favour in the last several years.

I think Morrisons are worth somewhat more than the 252+2p bid and probably within a week or two there will be a higher bid on the table.

With all the property plus a reasonable business operating from it, there is a lot of potential to sell and lease-back all the assets, then load the business with debt while extracting cash, window dress the accounts to show how well the business was doing under its new owners, then in several years time float it back onto the stock market for the same as it cost to buy, having pocketed the value of all its previous assets and some cash flows/dividends along the way.

I think by buying the whole business at 254p, one of these big funds can make a 100% profit on this over the next several years.