Morrisons prepares to sell its food production arm as costs bite Business

Clive Black, retail analyst at Shore Capital, said pressure on Morrisons’ bottom line, as well as rising interest rates, was likely to put pressure on CD&R to sell more assets and reduce the supermarket’s exposure to debt.

The private equity firm has pledged to provide around £3.4bn of equity for its takeover, but the rest is financed by debt.

Mr Black said: “Market conditions are very difficult at the moment and CD&R did not expect this when they entered into the agreement last year.

“It will absolutely increase the need to think strategically about the balance sheet and I imagine they will look to deleverage.

“Frankly, it shows how much it can change in a year.”

Another question that remains unanswered so far was whether CD&R will seek to sell the Morrisons food manufacturing business itself, rather than just the underlying properties, he added.

There is also speculation that the added pressure could lead to a bigger than expected sale of store premises.

Morrisons owns the vast majority of its stores, but CD&R has pledged not to engage in a “material” number of sale and leaseback agreements for at least a year after the combination ends. No such commitment has been made for the food manufacturing company or its properties.

CD&R won an auction battle for Morrisons in October, knocking out a rival consortium led by Softbank-owned Fortress Investment Group.

This month, the UK Competition and Markets Authority said it was “willing” to approve the deal on the condition that CD&R sell 87 petrol stations it separately owns through Motor Fuel Group.

Morrisons had no comment.

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This notice was published: 2022-06-12 16:38:32

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