Apollo said in a statement on Tuesday morning it was "in the preliminary stages of discussions with Fortress Investment Group" about "forming part of" the takeover bid for Morrisons. Fortress announced a £6.3bn ($8.6bn) bid for Britain's fourth largest supermarket earlier this month, which was supported by CPPIB — a Canadian pension fund — and a unit of Koch Industries.
Apollo said it doesn't plan to bid for Morrisons, other than as part of the Fortress consortium. The company reserved the right to launch a full bid if the Fortress deal falls through.
The statement effectively ends speculation about a possible bidding war for Morrisons. City analysts had predicted a possible three horse race between Fortress, Apollo, and CD&R, another private equity firm that saw an earlier £5.5bn bid for Morrisons turned down. Under takeover rules, CD&R had until 17 July to return with a counter bid, but the company let the deadline lapse over the weekend.
Shares in Morrisons dipped 0.6% in early trade on Tuesday morning. The stock was changing hands at 260p, which was still above the 254p-a-share bid announced by Fortress.
Morrisons' looming private equity takeover has sparked alarm in some corners of Westminster and the City, amid fears about what the deal could mean for UK food supply and jobs. The Bradford-based supermarket has around 500 stores across the UK and employs over 100,000 people.
Fortress has promised to maintain Morrisons' headquarters in Bradford, continue its existing strategy, and protect workers' rights. Apollo said on Tuesday it "would be fully supportive of Fortress's stated intentions regarding Morrisons."
Morrisons has attracted takeover interest due to its large property holdings and its modest valuation relative to international peers. The group owns 80% of its stores, which are valuable assets private equity can borrow against.
Data from market research firm Kantar published on Tuesday showed Morrisons had a market share of 10.1% in the 12 weeks to 11 July, down slightly on last year.
"It sets itself apart from the competition through its distinctive fresh counters and a continued use of multibuy promotions," said Fraser McKevitt, head of retail and consumer insight at Kantar. "While other retailers have cut back on counters, 14% of Morrison’s shopping trips include loose meat, fish, dairy, or delicatessen items from its Market Street sections, more than double the market average."
Disclosure: Apollo Global Management has agreed a deal to buy Yahoo Finance UK as part of a broader transaction with current owners Verizon. The deal has yet to close.
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