CD&R wins $10 billion auction for UK supermarket Morrisons By Reuters

By James Davey and Sarah Young

LONDON (Reuters) – Clayton, Dubilier & Rice (CD&R) has won the auction for Morrisons with a 7 billion pound ($9.5 billion) bid, paving the way for the U.S. private equity firm to take control of Britain’s fourth-biggest supermarket group.

The Takeover Panel, which governs M&A deals in the UK and arranged the auction, said on Saturday CD&R had offered 287 pence a share, while a consortium led by the Softbank (OTC:) owned Fortress Investment Group offered 286 pence.

CD&R’s victory marks a triumphant return to the UK grocery sector for Terry Leahy, the former chief executive of Britain’s biggest supermarket chain Tesco (OTC:), who is a senior adviser to the firm.

The winning bid was only slightly higher than CD&R’s 285 pence a share offer that Morrisons’ board recommended in August.

The board, due to meet later on Saturday, is expected to recommend shareholders accept the new offer at a shareholder meeting slated for Oct. 19.

Morrisons and CD&R had no immediate comment on the outcome of the auction.

If shareholders approve the offer, CD&R could complete its takeover of Morrisons by the end of the month, the second UK supermarket chain in a year to be acquired by private equity after a buyout of no.3 player Asda completed in February.

EGGS AND BUTTER

Bradford, northern England, based Morrisons started out as an egg and butter merchant in 1899. It listed its shares in 1967 and is Britain’s fourth-largest grocer after Tesco, Sainsbury’s and Asda.

The battle for Morrisons, which has been running since May, is the most high-profile of a raft of bids for British companies this year, reflecting private equity’s appetite for cash-generating UK assets.

CD&R has committed to retain Morrisons’ Bradford headquarters and its existing management team led by CEO David Potts, execute its existing strategy, not sell its freehold store estate and maintain staff pay rates. The commitments are not, however, legally binding.

Leahy was CEO of Tesco for 14 years to 2011 and will now be reunited with Morrisons CEO Potts and Chairman Andrew Higginson, two of his closest lieutenants at Tesco.

Potts, who joined Tesco as a 16-year-old shelf-stacker, will make more than 10 million pounds from selling his Morrisons shares to CD&R. Chief operating officer Trevor Strain will pocket about 4 million pounds.

Fortress is left to lick it wounds and mull the cost of the saga. Documents published in July showed that Fortress expected to incur banking and advisory fees and expenses of 263.5 million pounds.

In a statement the group said it wished those involved with Morrisons the best for the future, adding: “The UK remains a very attractive investment environment from many perspectives, and we will continue to explore opportunities to help strong management teams grow their businesses and create long-term value.”

Sainsbury’s has in recent months been mooted as another possible target for private equity and investment companies.

($1 = 0.7383 pounds)