United Kingdom

MARKET REPORT: Morrisons bidding battle sends shares soaring to their highest level since 2013

Shares in Morrisons hit their highest level since 2013 yesterday as investors prepared for a bidding war between two private equity groups. 

Clayton Dubilier & Rice are believed to be putting together a fresh offer ahead of the deadline at 5pm on Monday, after the grocer’s board backed a 254p bid from a rival consortium led by Fortress. 

Shares jumped 2 per cent, or 5.4p, to 273p, as investors anticipated another jump, but the rising price has sparked fears that a break-up of Morrisons is inevitable if the price rises any higher. 

Shares in Morrisons hit their highest level since 2013 yesterday as investors prepared for a bidding war between two private equity groups

Analysts at Bernstein said it ‘struggled to see the returns of the current offer without significant asset sales’, while further increases will only pump up the pressure to sell its food factories, warehouses, supermarkets and petrol stations. 

Last week shareholder dissent against the Fortress bid grew as investors pooh-poohed the bid as too low, and asked what expertise or strategy the consortium will bring to the table. CD&R will mirror the Issa brothers’ strategy at Asda by expanding Morrisons’ convenience network at its 900 petrol stations, which are owned by its Motor Fuel Group. 

The tense bidding war also led to suggestions over the weekend that Amazon, which has a delivery agreement with Morrisons, could be waiting in the wings to pounce – a move that would electrify the race and indeed the entire UK grocery market. The rise reflected a strong day on the London markets, with the FTSE 100 blue-chip index increasing 0.7 per cent, or 49.42 points, to 7081.72 and the FTSE 250 rising 1.1 per cent, or 259.84 points, to 23,208.67. 

The session was dominated by merger and acquisition activity after defence giant Meggitt received a £6.3 billion bid from US rival Parker-Hannifin. Meggitt shares gained 56.7 per cent, or 265.9p, to 735p, which spurred other defence firms, or those linked to the defence industry, higher. Engine maker Rolls-Royce added 3.8 per cent, or 3.77p, to 103.48p, BAE Systems increased by 1.1 per cent, or 6.6p, to 582.6p and Melrose finished up 5.2 per cent, or 8.3p, at 168.4p. 

STOCK WATCH: ESCAPE HUNT

Shares in Escape Hunt fled early gains that were encouraged by a trading update. The shares leapt in the day, but ended up down 4.3 per cent, or 1.5p, at 33.5p, after the update from the operator of ‘escape rooms’, a kind of Crystal Maze experience for paying punters. 

Trading in the ten weeks to the end of July was encouraging, the company said, with levels of occupancy returning faster than expected after lockdown. As a result, revenue and earnings during the period was ahead of management’s expectations. Chief executive Richard Harpham said they were optimistic looking forward.

In the utility market energy giant SSE sold its 33.3 per cent stake in Scotia Gas Networks for £1.22 billion. The company saw its shares lift 1.3 per cent, or 18.5p, to 1464p. The deal will see SSE sell its stake in the business to a consortium comprising of existing SGN shareholder Ontario Teachers’ Pension Plan Board and Brookfield Super-Core Infrastructure Partners. 

It is the final sale in SSE’s major disposals programme, which it launched last June. The company has now secured proceeds of more than £2.7 billion from its non-core assets and which has allowed it to increase investment elsewhere in the business. 

Merger Monday was in full swing and showed no signs of abating with Cambridge antibody firm Abcam snapping up a Californian drug discovery biotech for £245 million. Biovision has been supplying Abcam with life science research tools for the past 18 years. Biovision makes biochemical and cellbased tests for biological research, as well as providing companies with antibodies and enzymes. It has made Covid-19 tests. 

Abcam shot up 4.9 per cent, or 67p, to 1425p. But weaker than expected economic data from around the globe saw oil prices slip. Data showed China’s factory activity growth slipped sharply in July. While in the UK, manufacturing in last month grew at a slower pace than May and June, due to the large numbers of staff in self-isolation. 

The IHS Markit PMI fell to 60.4 from record highs of 65.6 in May, with any figure over 50 representing growth. As a result Brent Crude was off 4 per cent at $72.83 per barrel although BP (up 0.2 per cent, or 0.55p, to 289.75p) and Shell (up 1 per cent, or 14p, to 1433.8p) managed to stand firm and squeeze out gains.  

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