Morrisons’ chairman Andrew Higginson has a tricky balancing act on his hands.
Keep rejecting the unwanted overtures of the US private equity bidder stalking his company and there’s a risk it walks away.
If that happens, the share price will collapse back to where it was on Friday.
Accept the offer and he’ll be accused of selling the company on the cheap.
Mozzers says its trading prospects are just dandy for the coming year, but there’s no way the share price would surge on its own back to the price Clayton Dubilier & Rice is offering today.
The hope is presumably that, now it is “in play”, rival bidders will come in with a better price, or CD&R will voluntarily put more on the table.
At a premium of 29% to Friday’s close, its current tilt does look a bit stingy. The average private equity takeover premium since last October has been 37%, according to AJ Bell research.
To persuade the board and shareholders to say “yes,” it will have to offer a tad more even if rival bids from Amazon, Apollo or others don’t join the fray.
(I’m sceptical on Amazon, less so on Apollo. Apollo’s failed bid for Asda showed it’s into northern-weighted supermarket chains with less premium-end customers. Amazon owns Whole Foods and a handful of Amazon Freshes in London. Very different proposition).
Mozzers’ future is not just at the whim of others, though.
A takeover is not entirely inevitable.
It could boost its share price by playing the raiders at their own game; do some small scale asset stripping of its own.
Currently, largely as a legacy of the imposing figure of the late Sir Ken Morrison, it owns 85% of its stores.
It could sell some of that £8 billion-worth of bricks and mortar and send the proceeds back to shareholders.
It wouldn’t even have to flog the whole lot.
Sainsbury’s seems to get on OK owning 65% of its estate.
If Mozzers’ current managers don’t do it, someone else will.