Morrisons ‘most vulnerable’ to acquisition: analyst

By Nicholas Robinson contact

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Morrisons was the 'most vulnerable to a takover bid'
Morrisons was the 'most vulnerable to a takover bid'

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Morrisons’ 11% market share and poor past management makes it the “most vulnerable” of the big four supermarkets to acquisitions, a leading analyst has claimed.

“The top four grocers are all under pressure and Morrisons is the most vulnerable,” ​Julian Wild, head of the food team at Rollits solicitors, told FoodManufacture.co.uk.

Wild’s comments followed reports last week that South African businessman Christo Wiese was interested in acquiring a UK supermarket. After the speculation, Morrisons’ shares spiked on Friday (September 4) by 5% (7.5p) to 170p.

Wiese’s UK Brait investment arm already owns a 19% stake in the frozen food specialist Iceland and owns fashion firm New Look and gym chain Virgin Active.

‘Very poor acquisitions’

‘Morrisons has lost its way’

“Morrisons has lost its way and has to return to the values espoused by Sir Ken Morrison – understanding its customer base and offering real value.”

  • Julian Wild, Rollits solicitors

Although Wiese hadn’t specified which retailer he was interested in, Wild said: “Morrisons is pulling out of convenience, has never been a ​[compelling] player online, has made some very poor acquisitions and should have pulled out of own manufacturing long ago.

“A new investor with new ideas and resources to make Morrisons more competitive will probably be beneficial for the whole company. Morrisons has lost its way and has to return to the values espoused by Sir Ken Morrison – understanding its customer base and offering real value.”

Despite being confident in the likelihood of a takeover, Wild didn’t believe an investor from South Africa would help to consolidate the market, which “ultimately is what is required”.

“Ultimately, it will be down to the institutional shareholders and what they are offered,” ​Wild added. “If the price is right, they will sell and, seeing how Morrisons has performed in recent years, they may well be happy to exit.”

In June Wild predicted that sooner or later, the big four supermarkets – Tesco, Asda, Sainsbury and Morrisons – could eventually become the big​ three.

‘The most vulnerable’

Morrisons and Sainsbury were highlighted as the two most vulnerable supermarkets by Wild. He said: “For me, JS ​[Sainsbury] and Morrisons are the most ‘vulnerable’, but, obviously, both are big mouthfuls and both have pros and cons. The UK is a finite market.

“A merger or acquisition looks a strong possibility at some stage, as the big four struggle for growth and are eating each other’s lunch … eventually something has to give.”

However, at the time, Shore Capital director and head of research Clive Black, said: “It’s highly questionable that the big four will become the big three anytime soon.

“The Competition Commission – the predecessor to the CMA ​[Competition and Markets Authority] stated that it wanted four national players and for this to change would require a high level of approval and/or financial collapse of an incumbent player. These represent large barriers to change.”

Morrisons refused to comment.

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1 comment

What is the logic of opposition to food manufacture

Posted by James Drummond,

Julian Wild has stated his opposition to Morrison's food manufacturing divisions many times. However I can't follow the logic that the company should aspire to the values espoused by Sir Ken since it was under his leadership that they entered food manufacture in the first place. According to the Morrison website the "Farmers Boy" brand began as long ago as 1980 and by the time of Sir Ken's departure Morrison was among the top five in UK food manufacture. So was Sir Ken also wrong to have used food manufacture or is the error to have expanded it beyond the level endorsed by Sir Ken?
If the Wild analysis indicated that the manufacturing divisions were inefficient and created products of inferior quality compared to foods that Morrison could source from outside it would be easier to understand.
Without food manufacture what exactly would be the Morrison USP?

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