'Ken Morrison would be FUMING in his grave': Ex-Iceland boss warns British supermarket's 'product, brand and customer experience' will be at risk if £6.3bn takeover by US private equity firm goes through

Bill Grimsey told BBC Radio Four Today programme of his concern over takeover
It comes after Morrisons accepted £6.3bn bid from private equity firm Fortress
Yesterday, investment giant Apollo also announced it was considering an offer

Published: 09:35 BST, 6 July 2021 | Updated: 10:10 BST, 6 July 2021

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An ex-Iceland boss today said the former owner of Morrisons would be 'fuming in his grave' about a US takeover of the supermarket chain.

Bill Grimsey, former CEO of Iceland and Wickes, said the late Ken Morrison would be 'spitting' with rage about the proposed deal.

He also accused the supermarket's shareholders of 'being greedy', and warned Morrisons customers could lose out if the takeover goes through.

It comes after a £6.3billion takeover bid, led by from US private equity firm Fortress, was accepted for the Yorkshire retailer.

Yesterday, US asset management giant Apollo also announced it was considering submitting a proposal, while investment firm Clayton, Dubilier & Rice had a bid rejected last month.

The news of Apollo's interest sent share prices rocketing to 266p yesterday. But Mr Grimsey warned that a takeover by a US private equity firm could have ramifications for the Morrisons brand and its customers.

Speaking to BBC Radio Four's Today Programme, the businessman said: 'Private equity, particularly in the retail sector, is the ugly face of capitalism.

Bill Grimsey (pictured left), former CEO of Iceland and Wickes, said the late Ken Morrison (pictured right) would be 'spitting tat', as he accused shareholders of 'being greedy'. He also warned Morrisons customers could lose out if the takeover goes through.

He also accused the supermarket's shareholders of 'being greedy', and warned Morrisons (pictured: A Morrisons store) customers could lose out if the takeover goes through

It comes after a £6.3billion takeover bid, led by from US private equity firm Fortress, was accepted for the Yorkshire retailer

Ken Morrison: The son of a shop owner who turned his father's grocery chain into a supermarket empire

Ken Morrison was born in the Yorkshire city of Bradford in 1931.

He was the youngest son of a grocery chain owner, who initially set up the business in 1899.

While at school he would help his father's business, selling his father's products from market schools during the holidays.

He also served in the Royal Army Ordnance Corps as a National Serviceman in his younger days.

But when his father became ill he took over the business full time, aged just 26.

From the small group of shops his father had pulled together, Morrisons grew and grew under Ken.

And it became a major player in 2004, after completing a takeover of Safeway.

The company issued profit warnings soon after, due to issues with integration of the two businesses.

But under Morrison's guidance it recovered and continued to grow.

Morrison would go on to become the longest serving chairman of a top 100 public company in the UK, before eventually stepping back in 2006.

After a brief illness, Morrison died in 2017, leaving behind five children.

Four years before his death, he was thought to be worth around £1billion.

'I can't think of any company that has been bought by private equity where the product and the brand and the customer experience have been improved.

'Their main motive is to make money, and Morrisons is a ripe PLC that is full of assets that are able to be taken out on acquisition, property being the main one, into a property company, and then leased back to the company.

'Then cutting costs, improving profits, and then flipping the business for a massive profit - it's a well trodden path.'

Asked what he would say to shareholders who want to see share prices increase, he said: 'I would say they are greedy, and Ken Morrison is fuming in his grave.'

His comments come as yesterday Apollo Global Management became the latest firm to announce it is considering a bid for the Bradford-based supermarket chain.

The company was founded in 1990 by American billionaires Josh Harris, Marc Rowan and Leon Black.

Wall Street financier Black was the CEO of the company until March this year, but stepped down amid business links to Epstein, along with allegations of sexual harassment.

Black, who also stepped down as chairman, was accused of paying the late financier and convicted sex offender $158 million for advice 'relating to tax'.

He also faced allegations of rape by former model Guzel Ganieva, who claimed he 'abused' her 'for years'.

Black admitted he had entered into a 'consensual affair' with the former model, but denied her allegations of rape or sexual abuse.

Today his former company Apollo confirmed that it is 'in the preliminary stages of evaluating a possible offer for Morrisons' on behalf of investment firms managed by Apollo.

It added that no formal approach has yet been made to the board of the Bradford-based chain.

However, the update will spark speculation that shareholders could see a bidding war for the supermarket group.

The interest from Apollo comes two days after Morrisons told investors it had agreed a £6.3billion bid from a consortium of investment groups.

The offer, led by Softbank-owned Fortress which has partnered with Canada Pension Plan Investment Board and Koch Real Estate Investments, will see shareholders receive 252p per share plus a 2p special dividend.

The agreement came almost two weeks after private equity firm Clayton, Dubilier & Rice (CD&R) made an approach last month.

The American firm was co-founded by billionaire investor Leon Black, 69, who stepped down as CEO earlier this year amid controversy over his business links to paedophile financier Jeffrey Epstein

The deal was struck by Softbank-owned Fortress, Canadian pension fund CPPIB and a unit of Koch Industries, America's largest private company. Pictured: David Koch, right, with older brother Charles, left, on Morning Joe in November 2015

In a statement on Monday, Apollo added: 'There can be no certainty that any offer will be made, nor as to the terms on which any such offer might be made.'

It is understood that Apollo hired investment bank Morgan Stanley to advise over any potential offer.

The London-born entrepreneur who performed business DIY on then-struggling Wickes: Who is Bill Grimsey?

London-born businessman Bill Grimsey has led two major home improvement retail firms during his career.

And when it comes to business, he's not afraid to take-on a 'dooer-upper' as well.

When he landed the role as managing director of Wickes' then retail subsidiary, WBS, in 1996 it was in the midst of an accounting nightmare.

The company faced serious accounting irregularities - so bad that its share price was suspended.

But Grimsey, who initially left school at 15 to become a butcher's assistant, turned the company around.

It was later bought by Focus-Do-It-All for a reported £289million in 2000, before being sold four years later to Travis Perkins, for £950million.

A year after his Wickes success he took up the role of CEO at Iceland, just before the company announced a series of profit warnings.

He led the company for four years until 2005, when it was taken over by Icelandic firm Baugur.

Though Grimsey had success at Wickes, it was not to be when he moved to Focus DIY in 2007.

He became CEO of the firm in 2007 following a £230million takeover.

But two years later Grimsey asked for a CVA with creditors in order to try and save the businesses.

In 2011 the company called in the administrators, before the business was later closed down.

Listed convenience store chain McColl's told investors that its supply contract with Morrisons would not be affected by any potential change in the retailer's ownership.

In February, McColl's extended its wholesale supply contract by a further three years to January 2027.

'McColl's looks forward to continuing to build on the strong relationship developed with Morrisons over the years to serve our local neighbourhood communities with a high quality convenience offer,' it said.

It comes as critics raised fears that Morrisons customers, staff and suppliers could lose out after the supermarket's board backed Fortress' takeover bid.

The bidders have promised to be 'good stewards' of the popular British grocery business, vowing to keep the headquarters in Bradford and not to make any 'material' sales of its property.

But critics have questioned their intentions. Lord Sikka, a Labour peer and professor at Essex Business School, said: 'My concern is whether this is a good deal for consumers, employees and businesses in the supply chain. Private equity has a habit of only paying minimum wage and not offering any security to the supply chain.

'Various firms have made promises in the past to protect British jobs, but we need practical steps. And for that, you need to involve employees in the sale process.'

Morrisons bosses are set for bumper pay-outs under the Fortress offer. Chief executive David Potts would earn £19million for the 3million shares he owns outright and 4.6million that he could receive under various company reward schemes.

Operating chief Trevor Strain could make £11million and finance boss Michael Gleeson more than £3million.

The new Fortress-led offer will also include Canadian pensions giant CPPIB and KREI, a division of Koch Industries, owned by billionaire Donald Trump ally Charles Koch. Fortress was founded in 1998 by partners including Wesley Edens, a majority shareholder in Aston Villa football club.

Morrisons' shareholders will now vote on the deal. It must be passed by more than 50 per cent of those who vote and together they must hold 75 per cent of the company.

But top-ten shareholder, fund manager JO Hambro, said last week that bidders should be offering 270p per share for Morrisons – well above Fortress's bid of 254p.

Private equity firms buy companies and look to sell them on around five years later for a profit. But they are often criticised for their brutal tactics and short-term outlook.

Peter Harrison, boss of Schroders - one of the UK's largest asset management firms - warned that the UK faced a 'raid' from US private equity firms unless more was done to support public companies

UK faces 'raid' from US private equity firms unless more is done to support businesses, says top asset management chief

The boss of one of the UK's largest asset management firms has warned that the UK faced a 'raid' from US private equity firms unless more was done to support public companies.

Peter Harrison told the Financial Times that interest from US investors was an 'inevitable consequence' of the UK's governance regime and of the tax deductibility of debt.

Figures, published by the FT, show a spike in US bids to buy UK firms due to their depressed value in the wake of Brexit and the Covid pandemic.

According to the paper, private equity firms announced bids for UK-listed companies at the fastest pace in more than two decades.

Harrison called for a relaxing of the UK's governance code - which he said was 'written at the expense of public companies'

He also called for a focus on improving the quality of listed companies in the UK and urged the Government to allow investors access to non-quoted opportunities.

Harrison added: 'The incentive structures in the [fund management] industry don't support long-term thinking.'

Critics drew attention to the track record of Morrisons' new bidders. Charles Koch and his late brother David sparked anger in 2010 after pumping more than £700,000 into a campaign to repeal California's climate change laws. The family's foundation, which invests in property, has also funded pushes to evict tenants from their homes during the pandemic.

Meanwhile, CPPIB refused to back an agreement between shopping centre business Intu and its lenders to give it breathing room on its debt last year.

The fears for Morrisons come amid a wave of takeover attempts for British businesses by private equity firms.

Buyout companies unveiled 365 offers for companies between January and June – the most since records began in 1984 – leading to accusations of 'pandemic plundering' as they rush to snap up businesses on the cheap.

Last month, Morrisons rejected US giant Clayton Dubilier and Rice's £5.5billion bid.

It comes as the boss of Schroders - one of the UK's largest asset management firms - warned that the UK faced a 'raid' from US private equity firms unless more was done to support public companies.

Peter Harrison told the Financial Times that interest from US investors was an 'inevitable consequence' of the UK's governance regime and of the tax deductibility of debt.

Figures, published by the FT, show a spike in US bids to buy UK firms due to their depressed value in the wake of Brexit and the Covid pandemic.

According to the paper, private equity firms announced bids for UK-listed companies at the fastest pace in more than two decades.

Harrison called for a relaxing of the UK's governance code - which he said was 'written at the expense of public companies'

He also called for a focus on improving the quality of listed companies in the UK and urged the Government to allow investors access to non-quoted opportunities.

Harrison added: 'The incentive structures in the [fund management] industry don't support long-term thinking.'

Who wants to buy Morrisons and why? A Q&A of the brewing bidding war around the supermarket chain

Who currently owns and runs Morrisons?

The Bradford-based retailer was founded by William Morrison in 1899 as an egg and butter stall in Rawson Market.

Morrisons steadily expanded and became a publicly listed business under the leadership of Ken Morrison in 1967, listing on the London Stock Exchange.

It expanded further in 2004 with the £3.3 billion acquisition of rival Safeway, which helped to grow the northern-focused retailer further south.

The group has remained publicly owned since 1967, with the firm now largely owned by a raft of institutional shareholders, including Silchester International, Columbia, Blackrock and Schroders.

Morrisons has been led by chief executive David Potts since 2015, alongside chief operating officer, Trevor Strain, and chief finance officer, Michael Gleeson.

Mr Potts would be in line for a roughly £19 million payday were the 254p-per-share move completed and all his share interests paid out.

The company board have backed the offer by the Fortress-led consortium and said they believe it will 'support and accelerate our plans to develop and strengthen Morrisons further' if the acquisition goes through.

Who has agreed to buy Morrisons?

A consortium led by Softbank-owned Fortress is currently in the driving seat to buy the supermarket after it tabled the first firm offer and saw the FTSE 250 firm's directors back the move.

The group of investors targeting the acquisition also include Canada Pension Plan Investment Board and Koch Real Estate Investments, the vehicle of the US billionaire Koch Brothers.

Fortress - which was bought by Japan's Softbank for 3.3 billion US dollars (£2.4 billion) in 2017 - has previously invested in grocery retail in both North America and Europe.

In 2019, the private equity firm snapped up UK wine retailer Majestic Wines for about £95 million.

Fortress highlighted that it reversed planned redundancies at Majestic after it bought the business and would look to invest in Morrisons.

Who are the other potential bidders?

New-York based private equity firm Clayton, Dubilier & Rice made an approach on June 17 for Morrisons in an effort to expand its European retail footprint.

The 43-year-old company is one of the most firmly established investors in the sector and has been advised by former Tesco chief, Sir Terry Leahy, over the past 10 years.

Sir Terry, who has been heavily involved in its approach for Morrisons, helped CD&R secure a 60% stake in discount retail group B&M in 2013.

CD&R is also the owner of forecourt giant Motor Fuel Group (MFG), sparking speculation that it could strike a similar deal to the acquisition of Asda by EG Group founders, the Issa brothers, and private equity backers, TDR Capital.

The firm now has until July 17 to table a formal bid to buy Morrisons, due to UK takeover rules.

On Monday, fellow New York PE firm Apollo became the third firm to reveal its interest in a possible deal.

The asset manager confirmed that it is 'in the preliminary stages of evaluating a possible offer for Morrisons' on behalf of investment firms managed by Apollo but is yet to table a formal bid.

Apollo was launched in 1990 and has growth to encompass 15 global offices with about 455 billion US dollars (£328 billion) worth of assets at the end of last year.

Apollo was involved in a bidding process for a major UK supermarket last year as it tried to snap up Asda.

However, the UK's third biggest grocer was ultimately bought by the Issa Brothers and TDR.

Why Morrisons and what are the potential plans for the business?

Morrisons appears an attractive opportunity for private equity as its share value had recently sat below its pre-pandemic levels despite strong recent revenues.

Thin margins and rising costs have continued to press down on valuations in the supermarket sector, fuelling regular speculation for potential takeovers.

Nevertheless, Morrisons has significant ownership of parts of its supply chain and a large property portfolio which will appeal to possible buyers.

Neil Wilson, chief market analyst at Markets.com, said: 'Owning the bulk of its store estate outright makes it an attractive asset for private equity intent on gearing it up.'

The Labour party and MPs on the Business, Energy and Industrial Strategy committee have raised concerns that the retailer could be stripped of assets in a private equity takeover.

However, Fortress stressed over the weekend that it has not sold any of its freehold or long leasehold properties at Majestic and 'does not anticipate engaging in any material store sale and leaseback transactions' at Morrisons.

Sources close to CD&R said, last month, that the firm believes it 'shares the values of Morrisons' and recognises the quality of the retailer.

An acquisition could result in some combination between Morrisons and MFG, with Morrisons currently operating fewer convenience and forecourt stores than some of its competitors.

What next?

Morrisons shares leapt above 266p on Monday, suggesting the investment community believes that a bid higher than the 254p agreed offer is still on the cards.

Many of Morrisons shareholders have remained quiet about the latest moves but top 10 investor JO Hambro said last week it would hope for a 270p per share offer.

The current share price suggest that many traders currently believe the appetite of the three interested parties could spark a bidding war which will result in an offer nearer this price.

CD&R have just less than two weeks to place a firm bid if they wish to buy Morrisons so there are likely to be more updates soon.

There is also the potential that a major retail group could enter the fray with an offer.

Morrisons has a long-standing partnership with US online retail giant Amazon, with Morrisons selling groceries through its online platform in the UK.

Amazon has also grown its bricks and mortar retail business in recent years with its acquisition of Whole Foods in 2017 and its recent launch of three Amazon Fresh till-free stores in London.

AJ Bell investment director Russ Mould said: 'Strategically, Morrisons has cemented an important relationship as a key supplier and partner to Amazon, and to McColl's convenience stores.

'Amazon has long been touted as a potential buyer for Morrisons to help give it a much stronger foothold in the UK grocery markets so that's an obvious name to watch.'