Buyout frenzy adds £8bn to UK supermarket shares

Britain’s listed supermarkets gain more than £8bn in value after private equity interest in grocers send shares soaring

  • A bid for Morrisons in June set the industry ablaze with speculation 
  • Reports last week of potential interest in Sainsbury’s has boosted stocks even further
  • Morrisons shares alone have surged by 62.8 per cent, adding £2.7billion 
  • The interest in supermarkets stems from improvements to their prospects 
  • Britain’s listed supermarkets have gained more than £8billion in value after private equity interest in groceries sent shares soaring. 

    A bid for Morrisons in June set the industry ablaze with speculation, while reports last week of potential interest in Sainsbury’s has boosted stocks even further. 

    Overall, supermarkets have now added £8.2billion to their market value since Morrisons revealed it had rejected a bid from buyout firm Clayton Dubilier & Rice on June 19. Morrisons shares alone have surged by 62.8 per cent, adding £2.7billion. 

    Supermarket sweep: Overall, supermarkets have now added £8.2billion to their market value since Morrisons revealed it had rejected a bid from Clayton Dubilier & Rice on June 19

    Supermarket sweep: Overall, supermarkets have now added £8.2billion to their market value since Morrisons revealed it had rejected a bid from Clayton Dubilier & Rice on June 19

    Marks & Spencer saw its shares rise 20.1 per cent, increasing its value by £584m while Sainsbury’s rose 19.3 per cent and added £1.2billion. Tesco saw its shares rise 14.9 per cent and its market value by £2.6billion. And Ocado, which has a joint venture with M&S for online groceries, rose 8.3 per cent and gained £1.2billion in value. 

    Clive Black, of Shore Capital, said the interest in supermarkets stems from improvements to their prospects. After slashing costs and becoming more competitive, they have also benefited from the pandemic online shopping boom. 

    Stronger sales and fatter profit margins – as well as assets owned – are attracting private equity investors ‘like bees to a honeypot’, he added. 

    Black said: ‘These previously unloved, out-of-kilter supermarkets are now seen as a square peg in a square hole. 

    ‘I would not be surprised if we no longer have any listed British supermarkets in due course because even Tesco is not too big to be taken out by global private equity.’ 

    The private equity raid on the groceries industry began last year when the Issa brothers and TDR Capital swooped on privately-owned Asda in a deal worth £6.8billion. 

    The surge in interest has raised fears about jobs, pensions and debt levels. Kwasi Kwarteng, the Business Secretary, has been urged to probe the £7billion Morrisons deal over its impact on supply chains.

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