Labour urges government to protect Morrisons in potential private equity takeover

Opposition MPs say ministers must stop company falling victim to asset-stripping as share price rises

Last modified on Tue 22 Jun 2021 15.52 EDT

Labour has urged the government to step in to ensure a potential private equity takeover of supermarket chain Morrisons does not affect Britain’s food security, damage farming, or lead to job losses.

The country’s fourth-largest grocer, which employs 110,000 people, said on Saturday it had rejected an unsolicited £5.5bn offer from US buyout group Clayton, Dubilier and Rice (CD&R).

But Morrisons’ share price has shot up from 178p to 238p since markets opened on Monday, indicating that investors expect CD&R – or a rival – to return with a bid in excess of its initial 230p-a-share offer.

Opposition MPs said ministers must be ready to prevent the Bradford-based company falling victim to the kind of asset-stripping often associated with private equity buyers, who typically look to make their targets more efficient, before selling at a profit.

They raised concerns about the effect a deal would have on jobs, as well as the future of its nationwide network of meat, poultry, and fruit and vegetable facilities, which play a significant role in getting food to UK tables.

Morrisons’ food processing operations include a fish supplier in the Camborne and Redruth constituency of George Eustice, who has responsibility for food security as the secretary of state at the Department for Environment, Food and Rural Affairs.

Luke Pollard, the shadow Defra minister, said: “Morrisons isn’t just a big supermarket, it is also an important food producer.

“Government must ensure in the event of a takeover that jobs are protected, the business isn’t broken apart and that our nation’s food security is protected.”

Morrisons has 17 food processing plants, the majority in Tory constituencies, employing more than 8,000 people between them.

They include more than 140 who work at Falfish, a Cornish company that Morrisons bought earlier this year, becoming the first supermarket to own its own fishing boat in the process.

The company has operations in Falmouth and in Redruth, which falls within Eustice’s constituency.

Morrisons food production operations also include Farmers Boy, which makes bacon, mince and sausage, cooked meats, fruit and savoury pies, quiches and cheese from sites in Bradford, Winsford in Cheshire and Deeside in north Wales.

Labour MP Mark Tami, whose Alyn and Deeside constituency in Wales includes the Deeside plant where Morrisons employs 1,110 people, said a private equity buyout would be bad for jobs and British farming.

“There’s no mistaking this for anything other than an attempt to asset-strip a good business for short-term profit,” he said. “Morrisons has a strong pension fund, high rates of store ownership, and, most importantly in my area, its own production that in turn supports British agriculture.

“At a time when Britain more than ever needs investment and jobs, this deal looks to offer only a grim future for a good business.

“Should shareholders vote for the quick buck option, I believe regulators and the government must look very closely at whether this deal would undermine British jobs, including at Farmers Boy in Deeside.”

The government can intervene in takeovers on grounds of competition, national security, economic stability, media plurality and the ability to respond to pandemics. Labour has called for the government to give itself powers to step in where deals could affect long-term industrial strategy.

After CD&R confirmed it had made an unsolicited offer for Morrisons at the weekend, the supermarket chain said its board “unanimously concluded that the conditional proposal significantly undervalued Morrisons and its future prospects”.

CD&R has until 5pm on 17 July to make a firm offer at a higher price, or announce that it does not intend to pursue its interest.

Private equity buyers from the US have targeted the UK in recent months, scenting bargains after the pandemic depressed asset prices.

Analysts said the approach is likely to be the first of several overtures, a sentiment backed up by the stock market, where Morrisons shares closed at 237.8p on Tuesday, above the 230p-a-share initial bid.

Morrisons has long made its British supply chain a leading selling point, highlighting its arrangements with 2,700 British farmers, who deliver livestock and produce directly to its 17 food processing facilities, which supply 493 stores.

The company claims to be the largest single customer of the British farming industry.

The National Farmers Union said: “This is a developing story and we will be keeping a watch over any potential future takeover of Morrisons. We will assess the impact on farmers as details surface. Morrisons is a significant supporter of British farming and we would like to see this continue under any new ownership.”

A government spokesperson said: We are committed to ensuring that the UK remains open for business, while protecting the livelihoods of British workers and investment in the UK.

“The government recognises that overseas investors play a major and positive role in stimulating economic growth in every part of the UK. In most cases, it is right that mergers are treated as a commercial matter for the parties involved.”

The second part of a review of Britain’s food strategy, led by fast food chain Leon’s co-founder Henry Dimbleby, is due out later this year, with a government white paper on food set to follow within six months.

The first part of the review said the Covid-19 pandemic had revealed weaknesses in the UK’s food supply chain in times of crisis.

The Guardian has approached CD&R for comment.

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