Morrisons pay

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The City’s Takeover Panel has set out the terms of the forthcoming Morrisons auction between Clayton, Dubilier & Rice (CD&R) and Fortress Investment Group.

The PE firms have been locked in a pitched bidding war since the summer, with the Morrisons board switching its support from a £6.7bn offer by Fortress to an increased bid of £7bn from CD&R in August.

Shareholders are due to vote on the CD&R offer at a meeting scheduled for 19 October.

However, with neither offer being declared final by the two bidders, a “competitive situation” continues to exist under City rules of the Takeover Code.

To break the deadlock, the Takeover Panel has - at the request of PE giants - established an auction procedure to decide the new owner of the supermarket chain.

Consisting of a maximum of five rounds, the auction will take place on Saturday 2 October.

In the first round, either party is able to make an increased bid on their current offers.

If the auction fails to conclude after the first round, there will be up to a further three rounds, with either firm only eligible to make a bid if their rival has upped the price in the preceding round.

If there is still no clear winner, there will be a fifth and final round, with both offerors able to make increased bids.

Any increased bid lodged in any round of the auction procedure must be at a fixed price in cash in pounds sterling and in whole pence.

A bid lodged at any stage in the auction must be higher than any offer previously announced and is not allowed to consist of anything other than cash.

Additionally, in the fifth and final round, any bid by Fortress must be at an even number of pence and any offer lodged by CD&R must be at an odd number of pence. Each offeror is also permitted in the final round to make its offer subject to a condition that the other party also makes a bid.

Any increased bids lodged during the auction procedure will not be announced publicly by any of the parties.

The Takeover Panel will make an announcement following completion of the auction setting out the prices of the offer.

Morrisons is then required to make its own announcement by no later than 7am on Monday 5 October setting out the board’s view of the offers on the table and its intended recommendation to shareholders.

The auction will not go ahead if CD&R or Fortress release a statement before 5pm on Friday announcing they don’t intend to make an increased offer.

Morrisons, Fortress and CD&R all agreed to the terms of the auction procedure and the statement released this morning by the Takeover Panel.

Shares in the supermarket jumped 1.3% higher to 295.7p as the markets anticipated the bidding war to drive the price offered higher than the current offer of 285p.

Morning update

Food prices have jumped up for the first time in six months as the barrage of cost pressures and supply chain challenges started to filter through to consumers.

The latest Shop Price Index from the BRC and NielsenIQ showed food prices rose 0.1% in September, compared with a 1.2% fall in the previous month. The increase follows five months of deflation for the industry.

However, low prices for seasonal fresh food helped keep a lid on inflation, offsetting the rises elsewhere in ambient food.

Fresh prices fell for the tenth consecutive month in September, with deflation easing to 0.4% from a decline of 0.6% in August, while ambient inflation accelerated to 0.8%, up from 0.3%.

BRC chief executive Helen Dickinson said there were now clear signs the months-long cost pressures from rising transport costs, labour shortages, Brexit red-tape and commodity costs were starting to filter through to consumer prices.

“Food prices rose year-on-year for the first time in six months, and some non-food products, such as DIY and gardening, are seeing the highest rate of inflation since summer 2018,” she added.

“Other product ranges, such as furniture and electricals, have also seen annual prices rise for consecutive months, which is indicative of unresolved shipping issues coupled with high demand.”

Non-food deflation slowed to 1% in September, compared with a fall of 1.2% in August.

Annual deflation for overall shop prices eased to 0.5% as a result of the pressures on the food industry – coming down from 0.8% in August.

Upper Crust and Caffè Ritazza owner SSP Group has continued its recovery as sites reopen and passenger numbers return to railway stations and airports.

In a trading update for the fourth quarter ended 30 September, the group said revenues were down 53% compared with pre-pandemic levels. This was an improvement on the 73% drop in the third quarter.

Revenues in the second half of the current financial year are expected to come in at about 37% of 2019 levels - but SSP added that in the latest week this figure was at 53% of the sales generated two years ago.

Domestic and leisure travel - which makes up the bulk of the group’s revenue - is recovering more rapidly than international and business travel. And the recovery in the fourth quarter allowed SSP to reopen about 60% of its outlets, up from 30% at the end of the first half.

Geographically, the stronger trading has been led by Continental Europe and North America.

In Continental Europe revenue in the fourth quarter is expected to be 53% of 2019 levels driven by the ongoing recovery in rail passenger numbers and increased air passenger numbers over the summer holiday season.

In North America, revenue in the fourth quarter is expected to be 52% of 2019 levels reflecting the ongoing recovery in domestic air travel.

In the UK, sales have continued to strengthen following the easing of lockdown restrictions in July, led by the rail sector, and are expected to be 43% of 2019 levels in the fourth quarter.

In the rest of the world, where the vaccine roll-out has generally been slower, sales continue to be impacted by lockdowns in some markets, including Australia and Thailand, and in the fourth quarter are expected to be 29% of 2019 levels.

SSP said tight cost controls meants it would deliver positive EBITDA in the final quarter and broadly break-even for the second half.

“The stronger trading and cashflow performance in the second half of the 2021 financial year is encouraging and the medium-term outlook of a return to pre-Covid levels of like-for-like revenue and EBITDA margins by 2024 remains unchanged,” SSP added.

“However, the pace of the recovery remains uncertain, and as a consequence, our current planning assumption is for a slightly slower recovery in sales during the 2022 financial year.”

Shares in the group slumped 2.6% to 282.1p this morning.

Performance nutrition group Science in Sport has signed a major new partnership agreement with US basketball team the Milwaukee Bucks - the company’s first partnership with an NBA team.

Under the terms of the partnership with the 2021 NBA champions, SIS will support the Buck’s science team, through its ‘performance solutions’ model. This will include the integration of Science in Sport nutritionists within the team.

The company will be the ‘Official Vitamins and Supplements Partner’ to the Bucks, and Science in Sport assets will be carried across all Milwaukee Bucks’ digital platforms, as well as in-arena signage at the team’s home stadium, the Fiserv Forum.

CEO Stephen Moon said: “We are delighted to be partnering with NBA champions, the Milwaukee Bucks. This is our first agreement with an NBA team, and we believe that our ’Performance Solutions’ model, where our nutrition experts are embedded within the Bucks science team, will help to power further outstanding sports performance. A major focus will be personalising nutrition advice and solutions to each Bucks player.

“The agreement is an honour and a huge vote of confidence in our science-led approach and the high standards we have set globally in product innovation and product quality.”

The FTSE 100 bounced back from losses yesterday to rise 0.8% to 7,082.98pts this morning.

Early risers included AG Barr, which recovered all of yesterday’s losses (see below), climbing 2.7% to 535p, Just Eat Takeaway, up 2% to 5,624p, and Associated British Foods, up 0.9% to 1,914.5p.

Losers included Greencore Group, down 2% to 143.7p, Naked Wines, down 0.4% to 701p, and Nichols, down 0.4% to 1,327p.

Yesterday in the City

The FTSE 100 dipped 0.4% to 7,034.74pts yesterday.

Markets were in a less than optimistic mood despite record profits at Irn-Bru maker AG Barr. Shares in the soft drinks supplier slid 2% to 528p as investors fretted about the continuing impact of rising commmodity prices on the food and beverage industry.

Other food and drink stocks hit hard yesterday included Vimto maker Nichols, down 3% to 1,315p, and bakery chain Greggs, down 4.1% to 2,969p.

WH Smith, Deliveroo, Parsley Box, Naked Wines, Associated British Foods, B&M European Value Retail, McBride, Kerry Group and Marks & Spencer also suffered heavy falls.

Finsbury Food Group, Hotel Chocolate Group and Diageo were part of a handful in the industry to keep their heads above water, rising 2.1% to 96.5p, 2.9% to 409p and 1% to 3,532.5p respectively