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Morrisons (MRW)

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Dod101
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Re: Morrisons (MRW)

#436161

Postby Dod101 » August 20th, 2021, 9:14 am

pje16 wrote: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:


No need to apologise and I am just an interested bystander anyway.

Dod

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Re: Morrisons (MRW)

#436175

Postby Bouleversee » August 20th, 2021, 10:14 am

I completely agree with Dod. The Board turned down CD&R's first offer because it seriously undervalued the company and then accepted and recommended a Fortress one not much higher. They should have a good idea of the company's intrinsic value and just put forward opportunistic low offers without agreeing or recommending till one appears which gives shareholders a fair deal and after all these doldrum years I think we are still some way off that. They should have been capable of getting the s.p. up to current levels without selling at all. 3 offers "accepted" so far and still in the melting pot.

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Re: Morrisons (MRW)

#436177

Postby pje16 » August 20th, 2021, 10:25 am

Imagine your selling your house
First punter comes along with a joke offer
No
2nd one offers the askling price
Accept
3rd one then offers over 10K over
do you say No
It's all business

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Re: Morrisons (MRW)

#436183

Postby Bouleversee » August 20th, 2021, 10:39 am

pje16 wrote:Imagine your selling your house
First punter comes along with a joke offer
No
2nd one offers the askling price
Accept
3rd one then offers over 10K over
do you say No
It's all business


Not the way I would do it at all.

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Re: Morrisons (MRW)

#436186

Postby jackdaww » August 20th, 2021, 10:54 am

i held morrisons for years , on the basis that it was the best supermarket share - freeholds - vertically integrated etc , and undervalued .

its paid off with very nice total returns.

:)

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Re: Morrisons (MRW)

#436267

Postby pje16 » August 20th, 2021, 3:25 pm

Another II post
=================================================================================================================================
(Alliance News) - Wm Morrison Supermarkets PLC late Thursday accepted a raised offer from Clayton, Dubilier & Rice worth GBP7.0 billion, though analysts on Friday noted that the market does not expect rival suitor Fortress Investment Group LLC to go down without a fight.

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. The Softbank Group Corp-owned private equity firm said it will make a further announcement "in due course".

"Another offer from Clayton, Dubilier & Rice has reignited the bidding war for Morrisons. The improved offer has got the backing of management, and a higher price might seduce some shareholders who were previously sceptical about whether the company was being sold at the right price," Hargreaves Lansdown Equity Analyst Nicholas Hyett commented.

Morrisons shares were 4.3% higher at 291.32 pence each in London on Friday afternoon, valuing the company at GBP7.05 billion. CD&R's improved bid is for 285p per Morrisons share. The all-cash offer will be part-funded by loans from Goldman Sachs Group Inc, BNP Paribas SA, Bank of America Corp and Mizuho Financial Group Inc, CD&R said.

"This might not be the end of the story. Rival bidder Fortress has urged investors to hold fire on accepting the deal and are expected to make a further statement in due course. With the shares currently trading above the new and improved offer price, the market clearly thinks a better offer is a distinct possibility," HL's Hyett added.

The new CD&R offer has been unanimously accepted by the board of the Bradford-based grocer, and directors have said shareholders should vote in favour of the takeover at a meeting due in early October. If they do, the deal is expected to complete in the same month.

As a result, Morrisons withdrew its recommendation for investors to accept a previous 272p-per-share takeover bid from a consortium led by Fortress, worth GBP6.7 billion.

Investors had eagerly awaited CD&R's next move, after its first proposal worth GBP5.5 billion was rejected by the supermarket back in July. CD&R was then given until Friday to decide whether to outbid Fortress.

The New-York based private equity firm said Morrisons has "differentiated operational strengths", including its freehold property portfolio, wholesale business and partnerships with Ocado Group PLC and Amazon.com Inc.

The firm revealed some of its plans for the supermarket, including a potential commercial partnership with CD&R's Motor Fuel Group, which owns over 900 petrol stations in the UK.

Back in July, analysts at German bank Berenberg drew parallels to the takeover saga of grocer Asda, which is now in private hands.

In October, EG Group and private equity backers TDR Capital agreed a deal to take control of the UK supermarket chain from US retailer Walmart Inc. EG Group also operates forecourts.

Analysts at Shore Capital Markets commented: "CD&R has made a number of statements in relation to Morrisons, outlining that it believes the supermarket is a 'high quality business and well-positioned within UK grocery'.

"It also calls out its heritage and speaks to the legacy of the late Sir Ken Morrison."

Terry Leahy, a former Tesco PLC chief executive and advisor to CD&R said the private equity firm is "committed to supporting" Morrisons.

AJ Bell analyst Danni Hewson said: "It won't hurt shareholder sentiment that retail royalty Sir Terry Leahy is a senior advisor on this deal, and he took the opportunity last night to play on emotions, spotlighting his relationship with the late Sir Ken Morrison. But ultimately this is a numbers game and in business sentiment often only goes so far."

The Times reported Leahy said during a video message that he "knew Sir Ken Morrison well" and understood his "values and vision".

AJ Bell's Hewson noted the presence of Amazon could also prove interesting. The e-commerce firm had once been tipped by analysts to join the race to buy Morrisons.

"Will Fortress pick itself off the mat and find another level? It is a real possibility. Morrisons is unique, its production capabilities make it extremely attractive at a time supply is becoming a huge issue and the Japanese bank behind Fortress has deep pockets. Then there's the Amazon factor. No one really expects they'll table a bid, but even their position on the field is a huge factor," Bell added.

Analysts at Shore said the ball has been "placed back into the Fortress side of the court".

The takeover battle for Morrisons has been rumbling for months. In June, Morrisons rejected a GBP5.5 billion offer made from New York-based CD&R, which had sent the supermarket chain's share price soaring but which Morrisons ultimately said it was too low.

In addition, asset manager Apollo Global Management decided against making an offer for Morrisons. In July, Apollo said it was in the "preliminary stages of discussions" with Fortress, with a view of joining the consortium.

Later in July, GIC, one of the managers of Singapore's sovereign wealth funds, joined the bidding consortium led by Fortress.

At the time, this cooled the potential for a bidding war and ensured the Fortress-fronted consortium was the leader in the race to acquire Morrisons.
==============================================================================================================================
https://www.ii.co.uk/secure/my-news-fee ... 9640138300

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Re: Morrisons (MRW)

#436283

Postby Ricksure » August 20th, 2021, 4:16 pm

Looks like Dod is correct also the fat lady hasn't sung yet ....CEO David Potts could make £22million....https://www.dailymail.co.uk/news/articl ... ayday.html

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Re: Morrisons (MRW)

#436321

Postby Bouleversee » August 20th, 2021, 5:53 pm

Ricksure wrote:Looks like Dod is correct also the fat lady hasn't sung yet ....CEO David Potts could make £22million....https://www.dailymail.co.uk/news/articl ... ayday.html


How much of his own money has he invested in the company, as opposed to bonuses and free or cheap options? Before the bidding war started the s.p. was around the same as when he took charge in 2015 and considerably less than I paid for mine (276p) in May 2013. No wonder he was keen to accept almost any bid; need never work again. Difficult to see how he has benefited long-term shareholders who will barely get their money back at the latest recommended offer. A technique which other company directors may choose to emulate.

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Re: Morrisons (MRW)

#436360

Postby Dod101 » August 20th, 2021, 10:06 pm

pje16 wrote:Imagine your selling your house
First punter comes along with a joke offer
No
2nd one offers the askling price
Accept
3rd one then offers over 10K over
do you say No
It's all business


But it is not in the least comparable. Directors of public companies have a fiduciary duty to the shareholders to act in their best interests and accepting every offer that comes along is not that, demonstrated by the fact that Fortress came along a second time and voluntarily increased its previous offer which had already been recommended! pje16’s example is not at all the same thing as acting as custodian for others’ assets. It is clear that the directors do not have a clue about what the company is actually worth and appear to have no interest in finding out. They are looking increasingly silly and incompetent.

Dod

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Re: Morrisons (MRW)

#436363

Postby Arborbridge » August 20th, 2021, 10:32 pm

The MRW board seems to be acting like amateurs. Is this how they negotiate with suppliers? - I doubt it.
Dod is completely correct, not only have they been incompetent in performing their legal duty but they have been pathetic at playing the game of getting the best price. This is surprising as Dave Potts had a good reputation previously.

In accepting each offer that comes along in turn, they remind me of that old joke about Tsar Nicholas II. "Who's the second most powerful man in Russia? - the Tsar. Well, in that case, who is the most powerful man in Russia? - the man who last advised the Tsar."


Arb.

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Re: Morrisons (MRW)

#436421

Postby 88V8 » August 21st, 2021, 11:22 am

The takeaway for me from this saga is, in a takeover situation hedge your bets.

That's twice I've guessed wrong in recent times; when there was bid speculation around Marstons I didn't sell at 105p, now they've drifted back to 82p.
I sold Morrissons at 267p not expecting any more action, yesterday they were at 291p.

If I'd sold half and kept half, more dealing costs but at least I'd have been 50% right instead of 100% wrong.

Huh.

V8

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Re: Morrisons (MRW)

#436447

Postby Gengulphus » August 21st, 2021, 12:48 pm

Dod101 wrote:
pje16 wrote:Imagine your selling your house
First punter comes along with a joke offer
No
2nd one offers the askling price
Accept
3rd one then offers over 10K over
do you say No
It's all business

But it is not in the least comparable. Directors of public companies have a fiduciary duty to the shareholders to act in their best interests and accepting every offer that comes along is not that, ...

Agreed that it wouldn't be that, if the directors were accepting the offers. But they aren't accepting the offers, and indeed don't have the power to do that. Instead, they're recommending that shareholders vote to accept the offers, and they almost certainly haven't done that for every offer that's come along: their announcement about the original CD&R approach is worded as saying that the Morrisons directors "rejected" it - but they don't have the power to reject offers any more than they have the power to accept offers. CD&R could have put the deal they had in mind to shareholders then without the directors' recommendation and left it to the shareholders to do the job of accepting or rejecting it. So what actually lies behind that announcement is almost certainly that the Morrisons directors said to CD&R that they weren't going to recommend that deal or any easily-negotiated minor modification of it, and so weren't going to negotiate about it unless CD&R made serious improvements to it, and CD&R weren't willing to put the deal to the shareholders without the directors' recommendation.

Dod101 wrote:... demonstrated by the fact that Fortress came along a second time and voluntarily increased its previous offer which had already been recommended! pje16’s example is not at all the same thing as acting as custodian for others’ assets. It is clear that the directors do not have a clue about what the company is actually worth and appear to have no interest in finding out. They are looking increasingly silly and incompetent.

Personally, I think just about any director who issues a recommendation either way to shareholders about accepting an offer (or voting to accept one) is being rather silly: they're basically remunerated by the shareholders, acting collectively as the company, and so IMHO shouldn't be issuing financial advice to the shareholders unless they are authorised financial advisors (and any who happen to be authorised financial advisors are probably expected to at least declare conflicts of interest in the advice they give). Their job is to give shareholders information about the company and to pass on details of the offer, and possibly to get financial advice for the shareholders collectively and pass that on as well - but not to add anything of their own to it. I.e. the following from the latest recommended offer announcement:

Recommendation

· The Morrisons Directors, who have been so advised by Rothschild & Co as to the financial terms of the CD&R Offer, consider the terms of the CD&R Offer to be fair and reasonable. In providing its financial advice to the Morrisons Directors, Rothschild & Co has taken into account the commercial assessments of the Morrisons Directors.

· Accordingly, the Morrisons Directors intend to recommend unanimously that Morrisons Shareholders vote in favour of the Scheme at the Court Meeting and the Resolution to be proposed at the General Meeting, each to be convened as soon as is reasonably practicable following the date of this announcement, expected to be a date in or around the week commencing 4 October 2021.

should IMHO just say something like "Rothschild & Co have been employed by the Morrisons Directors to provide financial advice on the terms of the CD&R Offer, and have advised that they consider the terms of the CD&R Offer to be fair and reasonable." without extending that advice into advice about how to vote on the deal.

As to incompetence, I'd say it's a charge better directed at Rothschild & Co - there's no special reason to expect the Morrisons directors to be competent at company valuation, as their job is to run a supermarket business, and when faced with a situation outside the core of that job, employing outside advisors is a sensible thing for them to do. But given that Rothschild & Co are advising about an offer for Morrisons, I would expect them to a bit more competent at company valuation than they seem to be...

Still, the system is as it is, not as I think it ought to be! But I do wonder what would happen to a company director who, faced with an offer for their company, said to his or her fellow directors "No, I won't make a recommendation either way to shareholders about this or any other offer. I am not qualified or authorised to give them such financial advice. I cannot prevent the rest of you making a recommendation about it, but it won't be a unanimous recommendation." and stuck with it...

Arborbridge wrote:In accepting each offer that comes along in turn, they remind me of that old joke about Tsar Nicholas II. "Who's the second most powerful man in Russia? - the Tsar. Well, in that case, who is the most powerful man in Russia? - the man who last advised the Tsar."

That seems to me to be very apt! And the word "blameworthy" could be substituted for "powerful"...

Gengulphus

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Re: Morrisons (MRW)

#436545

Postby Dod101 » August 21st, 2021, 8:45 pm

Gengulphus. I am not highlighting your post but when I used the word acceptance as you have highlighted I made the same mistake that was highlighted much earlier in I think this thread. Of course the directors cannot accept an offer. I think I made that clear in my various posts. However I think under the takeover code or some such they are obliged to make a recommendation ( Before you trip me up on that and quote chapter and verse I have not checked) no doubt with the benefit of their highly paid advisers’s advice. I am fairly confident that that is their duty and it is not financial advice,it is merely their recommendation.

Anyway my main point is that recommending every bid that comes along renders any recommendation worthless and they might as well not bother; no shareholder ought to pay the slightest attention to these.

Dod

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Re: Morrisons (MRW)

#436552

Postby Gengulphus » August 21st, 2021, 9:55 pm

Dod101 wrote:... I think under the takeover code or some such they [the directors] are obliged to make a recommendation ( Before you trip me up on that and quote chapter and verse I have not checked) no doubt with the benefit of their highly paid advisers’s advice. I am fairly confident that that is their duty and it is not financial advice,it is merely their recommendation.

I've taken a look at the Takeover Code and failed to find any such obligation. And before you treat that as tripping you up: I'm interested in whether there is any such obligation, either one in the Takeover Code that I've failed to find or in some other bit of regulation - and that remark is directed at the entire readership of this board, in case someone knows of such an obligation and what imposes it.

I should possibly make it clear that that's about the directors recommending voting to accept the offer, not about them getting advice from Rothschild & Co and passing it on to shareholders, because I did find Rule 3.1 in the Takeover Code, which says "The board of the offeree company must obtain competent independent advice as to whether the financial terms of any offer (including any alternative offers) are fair and reasonable and the substance of such advice must be made known to its shareholders. (See also Rule 15(b) and Rule 21.1(d)(i).)"

If there is such an obligation somewhere, I'd be interested in whether it permits something like "The Directors recommend unanimously that shareholders make up their own minds and vote accordingly." ;-)

Gengulphus

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Re: Morrisons (MRW)

#436578

Postby Dod101 » August 22nd, 2021, 8:56 am

To reply to Gengulphus, as I was searching back through this thread, the difference between accepted and recommended was covered at the beginning of July and I thought that at that time I found a reference to the point about the Directors’ recommending a bid but alas I found nothing of any help. At any rate, the point is that they have a fiduciary duty to do their best for the shareholders and accepting the first bid (and, as it turns out, every subsequent bid) to be made seems to fall short of that. That was the point I was making. I still think that I found something about how they should act in the event of a bid but I am not currently well equipped to check on that as I am away from home at the moment.

Dod

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Re: Morrisons (MRW)

#436590

Postby BT63 » August 22nd, 2021, 10:10 am

Dod101 wrote:To reply to Gengulphus, as I was searching back through this thread, the difference between accepted and recommended was covered at the beginning of July and I thought that at that time I found a reference to the point about the Directors’ recommending a bid but alas I found nothing of any help. At any rate, the point is that they have a fiduciary duty to do their best for the shareholders and accepting the first bid (and, as it turns out, every subsequent bid) to be made seems to fall short of that. That was the point I was making. I still think that I found something about how they should act in the event of a bid but I am not currently well equipped to check on that as I am away from home at the moment.

Dod


The problems is: how do the directors know the correct price to demand for the business when Mr.Market said the business was worth about 180p/sh prior to the bids?

Further complicating things is that the business will be worth different amounts to different potential buyers depending on what they plan to do with it, over what timescales and what synergies there may be with other businesses the buyer holds.

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Re: Morrisons (MRW)

#436642

Postby Gengulphus » August 22nd, 2021, 1:32 pm

Dod101 wrote:To reply to Gengulphus, as I was searching back through this thread, the difference between accepted and recommended was covered at the beginning of July and I thought that at that time I found a reference to the point about the Directors’ recommending a bid but alas I found nothing of any help. At any rate, the point is that they have a fiduciary duty to do their best for the shareholders and accepting the first bid (and, as it turns out, every subsequent bid) to be made seems to fall short of that. That was the point I was making. ...

In case you've missed one of my points in viewtopic.php?p=436447#p436447 above, I'll expand on it: what tends to happen, and I believe has happened in this case, is that a potential offeror approaches the company with a conditional offer, one of whose conditions is that it will only be made if the directors indicate that they feel they can recommend it or something broadly similar, exact details to be negotiated.

If the directors indicate that they feel that, they and the potential offeror negotiate the details, which sometimes results in them agreeing a deal and a recommended offer being made. Other times, it results in no deal being agreed because what the offeror wants and what the directors will recommend aren't compatible with each other, at which point the potential offeror goes away and considers their options, which are basically to make a substantially better offer, to 'go hostile' with their current offer (i.e. make it without the directors' recommendation), or to give up on the idea of taking over the company. If they choose the first of those options, the whole process will start again when they approach the company with the substantially better offer.

On the other hand, if the directors indicate that they don't feel they can recommend the proposed offer or anything broadly similar, the negotiating doesn't happen and the potential offeror goes away and considers their options, which are as above.

My point is that a non-recommended offer is only announced if and when the potential offeror 'goes hostile', which few offerors are willing to do. Other times, one of four things happen about announcements: no announcement at all is made, an announcement is made that an approach was made but was 'rejected' by the directors, an announcement is made that an approach was made and might result in a deal being made (but with no certainty that it will), or a recommended offer is announced. Which of them happens is determined by Rule 2 of the Takeover Code, and especially by Rule 2.2. They're long, so I won't quote them, but their gist is that discussions about a takeover approach should preferably be kept strictly secret, but need to be announced if the potential offeror states a firm intention to make an offer, if news or rumours about the approach look to have leaked to the market, if the discussions have started to involve more than a very limited number of people, or in a couple of circumstances related to the rule that going over a 30% shareholding in the company makes it mandatory to make an offer for it.

So:

a) a takeover approach that is quickly and summarily 'rejected' by the directors will probably result in no announcement at all;
b) a takeover approach that is 'rejected' by the directors, but after discussions and consultation within the company may need to be announced, and the more extensive those discussions and consultation, the more likely it is that it will;
c) a takeover approach that the directors seriously consider and negotiate about will almost certainly need to be announced, either because word of it gets out or because too many people are aware of it;
d) a takeover approach that results in a deal definitely needs to be announced, usually as a recommended offer, but occasionally as a non-recommended offer if the offeror decides to 'go hostile'.

What we've seen here is entirely consistent with CD&R's having made an approach that reached stage b), followed by Fortress making one and then a higher one that reached stage d), and then CD&R making another approach that reached stage d). What we don't know is whether either of them (or indeed anyone else) made an earlier approach that only reached stage a).

So your point about the Morrisons directors having "a fiduciary duty to do their best for the shareholders and accepting the first bid (and, as it turns out, every subsequent bid) to be made seems to fall short of that" seems to me to be distinctly flimsy. It's pedantically true that they have recommended every bid that has actually been made, but the whole way that the system works (for any company, not just Morrisons) makes it quite unlikely that bid approaches will progress to actual bids unless the directors feel they can recommend them. And what we know about bid approaches that the Morrisons directors have received is that they have 'rejected' at least one ('at least' because there are possibly more that remained properly secret and so never needed to be announced at all).

In short, I think your point gets cause and effect the wrong way around: it's not a case of the Morrisons directors being willing to recommend any bid that comes along, but of bidders only being willing to make offers that the Morrisons directors will recommend. So while one can fairly accuse the Morrisons directors of setting their threshold for recommending an offer too low, the fact that they recommended the first actual offer that came along (and every subsequent one - they'd have looked really silly if they hadn't switched their recommendation to a higher offer unless they could point at a major disadvantage of the higher offer!) is an entirely normal part of the way takeovers work.

Gengulphus

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Re: Morrisons (MRW)

#436660

Postby Dod101 » August 22nd, 2021, 3:46 pm

Whatever the circumstances, the fact is that the Directors were happy to recommend the much earlier bid of 254p and after several subsequent bids the latest one stands at 285p and the share even higher in the market. I do not care whether I have got it the right way round or not my point is that the Directors were happy to settle for 254p when the fact is that someone thinks the company is worth at least 285p to them. If that does not indicate that the Directors are not very good negotiators and have (or their advisors have) no idea what the company is worth I do not know what does. It has in my book left the Directors looking rather silly. There is no point in going on and on about this but that is my point and there is not much more to be said.

Dod

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Re: Morrisons (MRW)

#436662

Postby EthicsGradient » August 22nd, 2021, 3:49 pm

Gengulphus wrote:the fact that they recommended the first actual offer that came along

More than one person has said this, but it's wrong. The first offer of 230p/share from CD&R was rejected by the directors: https://www.reuters.com/business/retail ... 021-06-19/

LONDON, June 19 (Reuters) - British supermarket group Morrisons (MRW.L) has rejected a proposed 5.52 billion pound ($7.62 billion) cash offer from U.S. private equity firm Clayton, Dubilier & Rice (CD&R), saying it is far too low.

Britain's fourth largest grocer by sales after Tesco (TSCO.L), Sainsbury's (SBRY.L) and Asda, said it received the "unsolicited, highly conditional non-binding" proposal of 230 pence a share on Monday.

The board of Bradford, northern England-based Morrisons rejected the proposal on Thursday.

"The board of Morrisons evaluated the conditional proposal together with its financial adviser, Rothschild & Co, and unanimously concluded that the conditional proposal significantly undervalued Morrisons and its future prospects," the group said in a statement on Saturday.

Shares in Morrisons, down 5.5% over the last year, closed on Friday at 182 pence, valuing the group at 4.33 billion pounds.

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Re: Morrisons (MRW)

#436668

Postby Dod101 » August 22nd, 2021, 4:07 pm

OK maybe not the first bid but they have pretty much recommended every subsequent bid.

Dod


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