Former Tesco Executives Square Up In Private Equity Bid For Morrisons
A bid by private equity firm Clayton, Dubilier & Rice (CD&R) to acquire supermarket group Morrisons has set up an intriguing clash of former Tesco executives.
Morrisons, the UK's fourth-largest supermarket chain by sales behind market leader Tesco, Sainsbury's and Asda, rejected a proposed £5.5 billion (€6.4 billion) cash offer from CD&R, according to reports at the weekend.
The offer was described by Morrisons as having 'significantly undervalued' the business, but British takeover rules give CD&R until July 17 to come back with a firm offer.
Former Tesco Chief Executive
CD&R is being advised by Terry Leahy, the man who transformed Tesco into Britain's dominant supermarket group and the world's third-largest retailer as chief executive for 14 years to 2011.
The private equity firm's offer pits him against Morrisons chairman Andrew Higginson and CEO David Potts, two of Leahy's closest lieutenants at Tesco, which reported its first-quarter figures last Friday.
Higginson spent 15 years on Tesco's main board, first as finance and strategy director and later as CEO of the company's retailing services business before leaving in 2012.
Potts joined Tesco as a 16-year-old shelf-stacker before working his way up to become CEO of Tesco's Irish business, its UK retail stores business and then CEO of Tesco Asia.
He left in 2011 after being passed over for Leahy's job.
That job went to Philip Clarke, who was sacked in 2014, shortly before an accounting scandal plunged Tesco into a crisis, raising questions over Leahy's legacy and tarnishing his reputation.
Potts and Higginson are not the only Tesco alumni to have ended up at Morrisons.
Finance chief Michael Gleeson and Trevor Strain, Morrisons' chief operating officer and the hot favourite to succeed Potts, were also at Tesco during the early stages of their careers.
On a potential takeover, the board of Morrisons said that it will seek assurances from any potential buyer on the future of its workforce, manufacturing and pensions as the supermarket group prepares for rival bids, the Times newspaper reported on Monday.
The move from CD&R could spark a bidding war from rival private equity firms or Amazon.com Inc, which has an online partnership with the grocer, the paper said.
The Labour Party warned on Sunday that a private equity acquisition of Morrisons, Britain's fourth biggest grocer, would put jobs at risk, but it is unlikely that the government would look to intervene, the Times added.
CD&R and Morrisons did respond to Reuters' requests for comment.
In May, Morrisons reported a 2.9% increase in like-for-like sales in the first quarter of its financial year.