Equity Briefing Morrisons and Porvair

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Morrisons and supermarkets

Shares in supermarket chain Morrisons will be on the radar this morning after reports that it has accepted a £6.3 billion takeover offer from a consortium of buyers after rejecting an unsolicited bid from Clayton, Dublier & Rice.

Morrisons has agreed on a 254.0 pence per share offer from a group of investors including Fortress Investment Group, Canada Pension Plan Investment Board and Koch Real Estate Investments. That compares to the 230.0p bid tabled and rejected last week by CD&R, which valued the UK’s fourth-largest supermarket chain at around £5.5 billion.

Chairman Andrew Higginson said the board feel the latest offer ‘represents a fair and recommendable price’ and that the board is recommending shareholders back the deal.

The latest bid may not be the last if CD&R ups its previous bid or if another interested rival enters the battle for Morrisons, with its partner Amazon having been long rumoured to be interested in the company. Bidders are particularly drawn to Morrisons because of its large freehold estate of stores and the supply chain that means it produces much more of its own food than some of its competitors.

The rivalry emerging for Morrisons could also spill over to its peers, bringing the likes of Tesco, Sainsbury’s and Marks & Spencer into the spotlight this morning.  

Porvair

Meanwhile, filtration specialist Porvair headlines an otherwise light day for the corporate calendar with interim results covering the six months to the end of May.

The company revealed in April that its Aerospace & Industrial division was still suffering as demand remains subdued since being hit by the pandemic, but that its Laboratory and Metal Melt Quality units had started to see an uptick in demand.

Overall revenue was up 12.5% year-on-year at constant currency and operating profits held broadly flat against what it described as a ‘strong’ comparative period. That is an encouraging sign considering revenue fell 4% in the four months to the end of March and investors will want to see evidence that continued in the final two months of the first-half and has persisted into the second.

The fact it has managed to return to growth even though the recovery is yet to take-off for its Aerospace & Industrial unit, which is the biggest division and largest contributor to profits in normal times, is impressive and means there is still a potential catalyst for the stock going forward.

Porvair shares trade around 25% higher than their pandemic-induced lows in March 2020 but still sit some 28% below the all-time high achieved before they were derailed.

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