‘Morrisons chiefs would not turn their backs on principles to do a wrong deal’

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As far as statements of intent by would-be buyers go, particularly private investors, Fortress’ words carried some big commitments about what sort of owner of Morrisons it would be.

Frequently, details of new owners’ plans post-takeover remain obscure until the transaction is complete. That prompts people to fear the worst – and there are plenty of examples when such fears turned out to be entirely justified.

A couple of weeks back, after it emerged that private-equity house CD&R was weighing up a £5.5bn pounce on Morrisons, I argued that it would be in the interests of everyone – including private investors themselves – to be far more transparent about their strategy and intentions.

Fortress, which has since agreed a £6.3bn takeover of Morrisons, has not just put up more money; it has been much more upfront about its plans than is sometimes the case in these situations.

There were reassurances on everything from pensions and pay (the landmark £10-per-hour rate Morrisons is now paying all shopfloor staff won support) to treatment of suppliers (no “material” changes to their terms are expected) and asset stripping (no “material” sale and leaseback programmes are in its thinking).

The mood music was all about a long-term approach, working with the existing management, and respect for what makes Morrisons Morrisons.

Fortress boss Joshua A Pack maintained: “We are committed to being good stewards of Morrisons to best serve its stakeholder groups, and the wider British public, for the long term.”

“The days when purchasers could pull the wool over people’s eyes by pledging one thing only to immediately do another are gone”

Cynics would argue that he would say that, wouldn’t he?

However, the days when purchasers could pull the wool over people’s eyes by pledging one thing only to immediately do another – as, in the most cavalier fashion, in the case of Kraft’s acquisition of Cadbury a decade ago, when a factory was shut despite assurances otherwise – are gone.

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Morrisons chief executive David Potts has done well by colleagues and customers

Today, statements of intent fall under the scrutiny of The Takeover Panel and failure to measure up may result in censure – a reputational outcome that no eminent investor would want to countenance.

Buyers must now update a year after deals complete to show that they have stayed true to their stated intentions or explain otherwise.

Yes, there might be some wriggle room in what Fortress said. What exactly does its use of the term “material” mean in practice, for instance?

However, Fortress and its partners are putting £3bn of equity into the deal – serious money that is a sign of serious commitment to Morrisons.

Compare that with the £780m of cash that Asda’s new owners the Issa brothers and their backer TDR Capital stumped up for Asda, with debt and asset disposals playing a big part in the deal.

Fortress’ custodianship of its other UK retail investment, Majestic Wine, also gives grounds for optimism that it would be a good owner of Morrisons.

The Morrisons deal document stated: “Since acquiring the business in 2019, Fortress reversed planned job cuts at Majestic Wine in the UK and opened new stores in 2020 and 2021, during the Covid-19 pandemic and for the first time since 2015.”

“There’s no reason to believe that Potts, Strain and Higginson would turn their backs on the principles that have guided them thus far if they didn’t think they had the right partner for a deal”

Morrisons chief executive David Potts and chief operating officer Trevor Strain have done a good job in their time in charge and during the chaos of the past year. They believe that Fortress is in it for the longer term and not a quick flip.

Potts told me when the deal was announced at the weekend that “the most important part of our company after customers is colleagues”. He has done well by colleagues, as well as customers, and other stakeholders such as suppliers.

There’s no reason to believe that he, Strain and Morrisons chair Andy Higginson would turn their backs on the principles that have guided them thus far if they didn’t think they had the right partner for a deal.

It is always possible that another buyer may emerge, but Morrisons’ management and Fortress – whose offer was at a 42% premium to the grocer’s share price – have set the standard high on expectations of what a good deal looks like. CD&R, or other potential buyers such as Apollo, would need to exceed that heightened bar.