Wednesday 12 February 2014

Founders Of Morrisons Considering Buyout: what this means for suppliers

Essentially, Morrisons appear to want to step back from short-term accountability to the stockmarket, and run the business with a longer-term perspective without having to explain and justify each move to outsiders.

However, unless the family – a 10% shareholding - can raise between the £5bn to £7bn it would take to buy-back the company, using a combination of own resources and personal contacts/bank borrowing, it will be necessary for them to make the move via a private equity partner.

Given that Morrisons own 80% of their estate currently valued at £9bn vs. £5.5bn market capitalisation, a private equity partner would want them to spin off much of the estate to release the ‘hidden value’ therein, going against the family’s wish to be independent of landlords etc.

For this to go Morrisons way, they would need to acknowledge the redundancy of large space retail. This means finding other business-uses for ‘spare’ space to justify their retention, or sell off the property portfolio.

Either way, it seems obvious that Morrisons will need to focus on financial measurement and ROI justification on every aspect of the business, going forward.

An obvious consequence is that any supplier wanting to accommodate Morrisons new approach will need to speak the same financial language, fast….

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