ALEX BRUMMER: The tragedy is the white-flag brigade at Morrisons have been doing a good job with grocer
- It may be fine for Morrisons, with £3billion of debt on its balance sheet, to be loaded up with more borrowing right now
- What happens when the happy-go-lucky years of free and easy money come to an end?
- Guff about honouring the legacy of the late Ken Morrison will be as nothing unless undertakings are extended beyond 12 months
What awaits Morrisons and its broader group of stakeholders when it falls into private equity hands is a matter of conjecture.
Shareholders and chief executive David Potts may be looking forward to filling their boots, amid competing bids, but there can be little room for optimism for the group’s 110,000 colleagues, the supply chain and for those who value financial stability.
The tragedy is that in spite of lacklustre first-half results, the white-flag brigade in the Morrisons board, who surrendered without a real fight, have been doing a good job with Britain’s fourth largest grocer.
Turning a corner: Guff about honouring the legacy of the late Ken Morrison will be as nothing unless undertakings are extended beyond 12 months
It has adapted to the online challenge with ‘Morrisons on Amazon’ which covers 60 towns and cities. As a user, I can testify to efficiency and quality of service.
It also has a strong relationship with Deliveroo and is increasing its convenience store access with McColl’s.
Same store sales slipped in the six months to August 1 but over the last two years there has been an 8.4 per cent uplift. It is frustrating that the stock market has never properly valued Morrisons’ property assets and importance in the ‘levelling up’ North. As a consequence, its fate will be decided by a Takeover Panel auction to be settled between the Terry Leahy-headed consortium of CD&R and the less alluring bid by Fortress, backed by unreliable Softbank.
The £7billion or so competing bids for Morrisons may put some £20m into Potts’ pocket and enrich advisors, but does very little for anyone else. To achieve the returns that private equity investors demand, there is going to be heavy cost-cutting and asset sales after loosely made bid promises unwind after 12 months.
It may be fine for Morrisons, with £3billion of debt on its balance sheet, to be loaded up with more borrowing right now. But what happens when the happy-go-lucky years of free and easy money come to an end? Guff about honouring the legacy of the late Ken Morrison will be as nothing unless undertakings are extended beyond 12 months.
As chairman, Andy Higginson could rescue his reputation and really ensure the future by demanding that pledges, such as retaining all freehold properties and production centres, are legally binding.
This would give the Takeover Panel the right to take the buyers to court if stipulations were breached. That might lead the buyers to retreat in horror.
But it would be for the greater benefit of UK food security, consumers and the broader public interest.
At least the proposed buyer-merger partner for Easyjet comes from the aviation sector. Many of the world’s biggest carriers have been built on mergers although not all have been roaring successes.
Johan Lundgren, having had to put up with the slings and arrows of founder Stelios Haji-Ioannou, clearly feels confident he can see off Hungarian carrier Wizz. The London-quoted airline, with its network of Eastern European routes, has emerged stronger from Covid than Easyjet.
It has focused on moving passengers from temperate northern climes to the Mediterranean and recovery has been hindered by confusing traffic light systems. The response of Lundgren to a sluggish return to the skies is to seek new capital of £1.2billion to ensure it has the financial firepower to come back stronger. Lundgren wants to use the war chest to buy up slots abandoned by other carriers in the pandemic. As Covid fades, Easyjet ought to have the slots, the reputation for better service than most no-frills carriers, and the fleet to bounce back.
Desire for cheap European travel looks unrequited as Ryanair’s response has demonstrated. BA’s talk of a return to Gatwick with stripped-down service suggests the sector is not down and out.
Wizz may have been sent packing, but if Easyjet doesn’t get better soon, it could attract other suitors.
They will still have Stelios to deal with.
Next science triumph for the UK down the float slipway is Oxford Nanopore with its technology which sequences DNA. It demonstrated its worth in the pandemic when its platform was used around the world to identify Covid variations.
At its last fund raising, the firm was valued at £2.4m. It plans a ‘golden’ share which evaporates as a takeover protection after three years. There are no profits yet but increasing confidence in British life sciences should ensure interest.