Morrisons (MRW.L) has agreed to a £7bn ($9.5bn) takeover by US private equity group Clayton, Dubilier & Rice (CD&R), which upped its bid for the supermarket chain, taking on rival suitor Fortress Investment Group.
Morrisons' share price surged 4.5% on Friday morning.
Earlier, CD&R had made an offer of 230p a share, which valued Morrisons at £5.5bn, but this was rejected for undervaluing the retailer. It has now increased its offer to 285p.
Morrisons has accepted the latest offer, which beats competitor bidder Fortress.
Sir Terry Leahy, senior adviser to CD&R funds and former Tesco CEO, said: "the grocery sector in the UK is undergoing great change and we believe Morrisons is well placed, with CD&R's support, to succeed in this environment."
Earlier this month Fortress had also raised its bid – from 254p to 270p per share, plus a special dividend of 2p. That offer had valued the supermarket group at £6.7bn.
It has now said it is “considering its options” and and has asked Morrisons shareholders not to take any action.
An investor meeting to approve the Fortress bid, scheduled for 27 August, has been adjourned, the Financial Times reported. A meeting to vote on the CD&R offer is expected in October.
Fortress had vowed not to sell Morrisons' assets, though analysts at Bernstein had said in a note that they did not see how bidders could make a return on a higher bid unless assets were sold.
Similarly, CD&R has said it will not sell off valuable store estate to raise cash as its statement showed Morrisons has £2.7bn of net debt.
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"The Morrisons board believes that the offer from CD&R represents good value for shareholders while at the same time protecting the fundamental character of Morrisons for all stakeholders,” said Andrew Higginson, chair of Morrisons, in a statement.
“CD&R have a strong record of developing, strengthening and growing the businesses that they invest in and they share our vision for Morrisons' future."
"This is an interesting crossroads that has huge potential for further market penetration," Chris Hunt, head of retail at law firm, Gowling WLG, told Yahoo Finance UK.
"There is a real opportunity to enhance and evolve a successful supermarket formula that already resonates with a strong customer base. Looking out for the enhanced supply chain opportunities that govern keeping or improving on their pole position is vital to this effort of course."
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