The purchase of Morrisons by Clayton, Dubilier & Rice is unlikely to be the last high-profile deal in the UK supermarket sector in the near future, with investors likely to begin circling other potential targets.
According to Danni Hewson, AJ Bell financial analyst, “Investors seem to be betting that this latest episode of supermarket sweep hasn’t rolled the end credits quite yet. Morrisons might have sailed through the checkout and is now sitting in the bagging area waiting to see if the sale goes through, but there are still two tempting morsels left on the shelf."
Possible Takeover Targets
Chief among these is Sainsbury's, with rumours that Fortress, which was unsuccessful in its bid to acquire Morrsions, may be eyeing a potential move.
Indeed, there is also speculation that private equity investors may even be "pawing over Tesco’s receipts", Hewson added.
"With so much money sloshing around after failed runs by two big players to snap up British businesses you can understand the anticipation," she said. "Fortress is said to be keen for another foray then there’s a few murmurings that Apollo might consider switching tack after losing the battle for Vectura to big tobacco."
As she explained, for many investors, UK supermarkets are a bit of a "money spinner", and a potentially lucrative investment in the current economic situation.
"Though competition is back on the menu after the discounters came off the bench that they’d rested on during the COVID crisis, there is a certain certainty about the business model that may inspire a second or even a third glance," Hewson added.
Morrisons Management Team
Elsewhere, the reuniting of former Tesco CEO Sir Terry Leahy with David Potts (Morrisons CEO) and Trevor Strain (CFO), both of whom are ex-Tesco, as a result of the Morrisons takeover, is likely to put Morrisons "on the front foot" when it comes to retail transformation, Nick Everitt, director of advisory, EMEA at Edge by Ascential has said.
"With Sir Terry as potential chairman, Morrisons will have a very experienced and high calibre management team," Everitt noted.
"This is an interesting move for Morrisons as the combined leadership of these retail titans could make waves in the retail space, and change its position in the market."
Potts worked alongside Leahy during one of the most successful periods in Tesco's history, as the retailer bolstered its presence in a number of European and Asian markets.
He added that the retailer is already showing signs of heading in the right direction, with its partnership with Deliveroo Hop expanding its presence in the home delivery market place.
"Entering the rapid delivery space is good example of positive innovation [by Morrisons], allowing it to keep up with its competitors and its challengers," said Everitt.
© 2021 European Supermarket Magazine. Article by Stephen Wynne-Jones. For more Retail news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.
